Renewable Natural Gas – Driving Sustainability Goals and Navigating Legal Issues

David McCullough, Partner Eversheds Sutherland LLP

October 30, 2020

© 2020 Eversheds Sutherland (US) LLP All Rights Reserved. This communication is for general informational purposes only and is not intended to constitute legal advice or a recommended course of action in any given situation. This communication is not intended to be, and should not be, relied upon by the recipient in making decisions of a legal nature with respect to the issues discussed herein. The recipient is encouraged to consult independent counsel before making any decisions or taking any action concerning the matters in this communication. This communication does not create an attorney-client relationship between Eversheds Sutherland (US) LLP and the recipient. Eversheds Sutherland (US) LLP is part of a global legal practice, operating through various separate and distinct legal entities, under Eversheds Sutherland. For a full description of the structure and a list of offices, please visit www.eversheds-sutherland.com. What is Renewable Natural Gas/Biomethane/Biogas?

─ RNG, biomethane and biogas are all terms that relate to the gas (composed primarily of methane) produced from the breakdown of organic material at various locations, including: • Landfills • Wastewater treatment facilities • Dairy, swine, poultry farms and facilities • Food and organic waste collection ─ “Biogas” typically refers to the raw, unprocessed gas that is collected at the source where the breakdown of organic material is occurring. ─ Renewable natural gas (“RNG”), also sometimes referred to as “biomethane”, typically refers to biogas that has been processed and upgraded to pipeline quality specification. This is done through removing a number of the impurities contained in the biogas. • Once upgraded to RNG, the product is commercially interchangeable with traditional natural gas shipped on pipelines and by other means. ─ These terms may be defined differently or undefined under various regulatory programs. The industry often uses them interchangeably, but the definitions above are the most commonly understood.

Eversheds Sutherland 2 What is driving investment in RNG?

─ RNG Projects are driven by monetization of the environmental attributes associated with the Project. Over the years, keys to facilitating this monetization have been: • State Renewable Portfolio Standards that require the production of electricity from renewable sources have long provided a baseline interest in RNG • From 2007 – 2015, the federal Renewable Fuel Standard (“RFS”) transformed the transportation fuel landscape • Ethanol and biodiesel came into the market in significant quantities • Since 2015, a combination of the RFS and the California Low Carbon Fuel Standard (“LCFS”) have driven significant investments in very low carbon intensity fuels • Large quantities of RNG, renewable diesel and renewable jet fuel are now present in the market • While there has been recent uncertainty associated with the future of the RFS, the RFS will continue to provide support for advanced biofuels • State LCFS programs, most notably in California, will be the primary catalysts for bringing on additional quantities of advanced biofuels in the near term • Renewable diesel from tallow and waste oils as well as biogas from dairy farms will be the primary beneficiaries • Voluntary programs, as well as corporate mandates, will also provide incentives

Eversheds Sutherland 3 Environmental Attributes: What are they?

Eversheds Sutherland What Are Environmental Attributes?

─ RNG projects produce significant amount of environmental attributes and understanding them is critical to ensuring their validity and ultimately successful monetization ─ Environmental attributes go by many names: • Environmental attributes • Renewable attributes • Green attributes • Green tags ─ Regardless of the name, they generally refer to the same thing: • The “non-energy” attributes of a fuel or electricity, including type of resource, avoided emissions, environmental benefits and other aspects associated with the production, combustion, use and transport from the point of the production to the intended use of the underlying commodity • Includes credits generated, the rights to credits to be generated in the future and the right to make marketing claims • Tax credits are not typically thought of as being an Environmental Attribute

Eversheds Sutherland 5 Environmental Attributes, Variations on a Theme

─ The type and number of credits that are able to be generated on the Environmental Attributes are dependent upon the method of production, quantity, transportation and use of the biogas. ─ The ability to generate credits on Environmental Attributes may change over time as regulations evolve and the opportunity to generate new credits may arise ─ Different entities may generate and claim these credits depending on where they sit in the value chain ─ Different regulatory programs may define environmental attributes differently (e.g., State RPS Programs and the California LCFS) ─ Different companies may have varying ideas on what constitutes an environmental attribute ─ No industry standard documentation for trading environmental attributes ─ Environmental Attributes generally are not considered a good under the UCC ─ Therefore, it is critical to define the term in all of your contracts

Eversheds Sutherland 6 How Are They Defined in Contracts?

─ Approaches to defining environmental attributes vary, but largely depend on how they are used and your role in a transaction (producer, marketer, retailer, consumer).

─ An example of a comprehensive definition in the biogas context: • “Environmental Attributes” means any and all current and future rights, credits, benefits, air quality credits, methane capture credits, renewable energy credits, emission reductions, offsets and allowances, howsoever referred to, associated with the capture, production, generation, transportation, use and environmental characteristics of Biogas, the production, generation, transportation, use and environmental characteristics of RNG derived from such Biogas, the displacement of fossil-based natural gas for any use (including thermal use, electricity generation and use as a transportation fuel), the reduction of air pollutants or the avoidance of the emission of any gas, chemical or other substance, including without limitation any similar attributes, whether arising out of international, federal, state or local laws or regulations including without limitation renewable energy credits under Renewable Portfolio Standards, RINs under the EPA RFS and LCFS Credits under state low carbon fuel standards.

─ Parties frequently include a carve out for tax credits associated with the physical biogas production and distribution facility assets: • Environmental Attributes shall not include any existing or future tax credits, depreciation deductions and depreciation benefits, or other tax benefits arising from biogas production, distribution, transportation and end-use facilities.

Eversheds Sutherland 7 Platforms to Trade Attributes

─ There is no established platform to trade or clear “Environmental Attributes” as a package/bundle of intangible assets, so title must be established through documentation ─ Certain credits generated from the package of Environmental Attributes may trade on platforms • RINs trade on EPA’s EMTS System • LCFS Credits trade on the LRT-CBTS System • RECs associated with renewable electricity, for example, are commonly transferred within tracking systems managed by electricity market operators (e.g., PJM, MISO, ERCOT) • M-RETs launched renewable thermal REC in January 2020 ─ If no tracking system or other platform is used, title transfer is a matter of contract. Thus it is important to document through attestations and other assurances (depending on the applicable regulatory regime.

Eversheds Sutherland 8 Managing Risk in Trading Agreements

Key Risks ‒ Proving title – Can the seller establish and convey clean title? ‒ Definitional gaps (Disaggregation) – Is the product defined to be adequately inclusive? ‒ Pathway – Can the seller demonstrate (or otherwise be obligated to help demonstrate) the necessary pathway from source to end use? ‒ Double counting – Have any other parties claimed the attributes? ‒ Regulatory compliance – Do the attributes or credits meet regulatory requirements? ‒ Change in law – What if the law changes?

Eversheds Sutherland 9 Contracts Used to Trade Environmental Attributes

With Biogas: ─ NAESB • While this has become industry standard, the use of the NAESB is burdensome as it was not designed with environmental attributes in mind. It also contemplates the physical delivery of gas, which often does not occur in these transactions. ─ Bespoke Agreement • The use of an exchange agreement between the producer is often a more elegant way of transferring gas with attributes where the physical transfer of gas is required (e.g., where RIN generation may occur under the RFS). With Electricity: ─ Bespoke Agreement • Commonly used and based on developer forms. Larger corporate offtakers also have their own forms in use within the market. ─ EEI/ISDA • Use of the EEI master is very common for electricity commodity, combined with the REC Annex when including the environmental attributes in renewable energy transactions. • Traditionally geared towards a pure financial agreement, the ISDA has a physical power annex to which parties also add their own REC sub-annex. ISDA is currently considering the development of a special REC annex. Unbundled: ─ RECs: Bespoke agreements, various industry group stand alone forms ─ RINs and LCFS Credits: LEAP Agreement ─ Raw Attributes: Bespoke agreements, attestations.

Eversheds Sutherland 10 Representations and Warranties

─ Additional contact representations are included to address unique concerns around regulatory requirements, double counting and marketing claims: • all Gas delivered to Buyer meets the definition of Biogas; • All attributes are valid and eligible for future credit generation • Seller has not encumbered, or otherwise agreed with any other party to prevent the future creation or sale of, the Environmental Attributes to be sold to Buyer; • Seller has not sold or agreed to sell or otherwise monetize the Environmental Attributes associated with the Biogas to be sold to Buyer to any party other than Buyer; and • Seller has not claimed, and agrees that it will not hereafter claim, any Environmental Attributes, “renewable gas”, “green gas” or similar attributes of the Biogas Plant or Biogas to be sold to Buyer as belonging or attributable to Seller, to the Biogas Plant or the Biogas Plant’s production equipment.

Eversheds Sutherland 11 Covenants

─ Certain covenants are included to ensure/protect the ability to create/claim certain attributes: • Regulatory Compliance: Seller agrees to provide an attestation, certification or other reasonably required information to the EPA or other governmental authority having jurisdiction over Buyer to demonstrate the Pathway and that such Environmental Attributes were assigned to Buyer for the sole benefit of Buyer. • Title: Seller will provide such cooperation, access to facilities, additional documentation, certifications or other information as may be necessary for title to the conveyed Environmental Attributes to vest in the Buyer in connection with the purchase and sale of Biogas hereunder. • Further Assurances: Seller shall provide such authorizations, certifications, documentation, access to facilities, information and assistance reasonably necessary for Buyer to verify, generate credits or register the Environmental Attributes in connection with any compliance program or third-party certification. • Marketing and Publicity: Seller shall not report in any public communication, or under any mandatory or voluntary program, that any of the Environmental Attributes or part thereof provided to Buyer hereunder belong to any person other than Buyer or Buyer’s designee.

Eversheds Sutherland 12 Damages Provisions

─ Indemnification sometimes includes coverage not just for direct damages for a breach of representation or covenant, but also may include liquidated damages to compensate the buyer for the resulting loss of value associated with the attributes. ─ Call for the replacement of invalidated credits? ─ Cover fines and penalties for breach? ─ Counterparties to other agreements (e.g., brown gas purchaser & interconnecting pipeline) may be held liable for special categories of damages for failure to convey or cooperate.

Eversheds Sutherland 13 Verification Overview

─ Currently there is no industry or regulatory standard for verifying the package of environmental attributes. ─ There are verification standards for individual credits generated: • RINs – EPA’s Quality Assurance Program • LCFS Credits – California’s verification standard • RECs (mandated) – state verification standard • RECs (voluntary) – Green-e verification

Eversheds Sutherland 14 Investment Driver #1: RFS

Eversheds Sutherland Renewable Fuel Standard: Background

─ History: Originally passed in 2005 as part of the Energy Policy Act (“RFS1”); substantially amended and strengthened in 2007 as part of the Energy Independence and Security Act (“RFS2”). ─ Purpose: Incentivizes/mandates the use of renewable fuel in transportation fuel, heating oil and jet fuel. ─ Policy Reasons: 1. Domestic job and industry growth (both energy and agricultural jobs—notably corn) 2. Energy security 3. Reduction in greenhouse gas (“GHG”) emissions ─ What constitutes renewable fuel? 1. Produced from renewable biomass 2. Achieves certain GHG emission reductions 3. Replaces volumes of transportation fuel, heating oil and jet fuel

Eversheds Sutherland 16 RFS: Basic Structure of the Program

─ Requires refiners, importers and component blenders of gasoline and diesel (“obligated parties”) to ensure that renewable fuel replaces petroleum-based transportation fuel, heating oil and jet fuel. ─ Renewable fuel producers generate credits (“Renewable Identification Numbers” aka “RINs”). ─ RINs can be separated under specified conditions. ─ Separated RINs are freely traded. ─ RINs are valid for the year in which they are generated and the following year. ─ RINs are retired by obligated parties and renewable fuel exporters corresponding to the amount of gasoline and diesel they produce or renewable fuel they export.

Eversheds Sutherland 17 RFS Mandates and Fuel Types: 2020 Final Rule - Significant pressure for advanced biofuels and cellulosic biofuel

Total Renewable Fuel – 20.09 billion gallons (D6 + D3, D4, D5, D7 RINs) Advanced Biofuel – 5.09 billion gallons [Mostly corn ethanol] (D5 + D3, D4, D5, D7 RINs) Cellulosic Biofuel – 0.590 billion gallons (D3, D7 RINs) Biomass-Based Diesel – 2.43 billion gallons (D4 RINs) (approximately 3.8 billion RINs)

[Mostly biogas, but also cellulosic renewable diesel and jet fuel] [Biodiesel and [Mostly sugarcane ethanol, but renewable also other advanced fuels, diesel] such as renewable heating oil and biodiesel/renewable diesel co-processed with petroleum]

Eversheds Sutherland 18 RIN Prices

Eversheds Sutherland 19 Granting of Small Refinery Exemptions (“SREs”)

─ Exemption provided by Congressional Statute: • The RFS provides an exemption from RIN retirement obligations for any refinery that processes less than 75,000 barrels per day of crude oil and suffers disproportionate economic hardship. ─ Supply creation (not demand destruction) • Under Obama, SREs were granted prospectively and the exempted volumes were rolled into the obligations of other non-exempt refineries. • Under President Trump, the number of SREs granted increased dramatically. More importantly, during the first 2.5 years of the Trump Administration, SREs were issued retroactively, and RINs the refineries had retired for compliance were refunded to the exempted refineries— creating an unexpected surplus of RINs. • In 2020, EPA began taking into account the 3-year average of RINs that the U.S. Department of Energy recommended be waived. • Tenth Circuit decision holding (in part) those refiners with a gap in their SRE record were not eligible for future SREs. • In September, in an an effort to garner support in Iowa, Minnesota and Wisconsin, President Trump rejected 54 “gap year” SREs. • Query whether this has a net benefit to renewable fuel producers when the 2021 standards are set because some of those rejected had DOE recommendations in favor of them.

Eversheds Sutherland 20 Granting of Small Refinery Exemptions (“SREs”) (con’t) ─ History of SREs Compliance Year Petitions Received Petitions Granted Total RINs Refunded 2013 30 8 Very few and granted prospectively 2014 28 8 Very few 2015 28 7 Very few 2016 29 19 790 million 2017 37 35 1.82 billion 2018 44 31 1.43 billion 2019 31 0 N/A 2020 4 0 N/A ─ RINs refunded to small refineries • In the year following the compliance year, EPA refunded approximately (likely less): RIN Type 2017 Compliance Year 2018 Compliance Year D6 RINs 1.4 billion 1.1 billion D5 RINs 122 million 64 million D4 RINs 284 million 233 million D3 & D7 RINs 29 million 21 million ─ White House has provided for a partial fix to the situation by increasing the real number of RINs that refiners must purchase.

Eversheds Sutherland 21 Philadelphia Energy Solutions Bankruptcy

─ In January 2018, Philadelphia Energy Solutions (“PES”) filed a voluntary petition with the U.S. Bankruptcy Court for the District of Delaware seeking to reorganize under Chapter 11 of the U.S. Bankruptcy Code pursuant to a pre-packaged plan of reorganization.

─ In April 2018, the Bankruptcy Court approved the settlement agreement between PES, EPA and DOJ, under which EPA agreed to forgive at least 329 million of the more than 467 million RINs PES owed the agency from its 2017 RVO and 2016 deficit carryover; requiring the company to retire only 138 million RINs.

─ The settlement agreement specifically stated that it would have no precedential value in any other bankruptcy or non-bankruptcy matter with different facts and circumstances.

─ In June 2020, the Bankruptcy Court approved a proposed settlement agreement between the EPA, DOJ, and PES resolving PES’s outstanding 2019 RFS compliance obligation, which requires PES retire approximately 161 million RINs, but only at maximum cost of $22 million—allowing the forgiveness of at least $50 million in RIN acquisition costs (revenue that renewable fuel producers will miss out on). Obligation must be satisfied by September 24.

Eversheds Sutherland 22 RFS 2020 – 2022

─ The “reset” of the RFS volumes: • Due to the failure of the renewable fuel industry to meet certain volumetric production thresholds, by the end of this year EPA is required to engage in a resetting of the RFS standards for 2020, 2021 and 2022. • Reset is based on a variety of factors including impact of renewable fuels on the environment, infrastructure, consumers job creation, food prices, supply of agricultural commodities and the expected rate of production of renewable fuel. • In other words, EPA will have significant discretion to set the standards. • Proposal expected very soon. ─ RINs on renewable electricity from biogas and biomass: • Allowed by the RFS, but currently there is no pathway. • Lawsuit may be needed to push EPA to provide for RIN generation. • Any such allowance would significantly increase the number of RINs in the market. ─ RINs on biogas used as LNG bunker (i.e., vessel) fuel: • Possible reading of the RFS would allow for RIN generation on biogas converted to LNG used to power vessels. • With IMO 2020, use of LNG as a bunker fuel will increase significantly. • Any such allowance would significantly increase the number of RINs in the market.

Eversheds Sutherland 23 Future of the RFS 2023 and Beyond

─ There will be an RFS? Yes! • Mandatory renewable fuel volumes are only stated through 2022, leading some to believe that the RFS will then “expire,” which is inaccurate. ─ Post 2022: • RFS will continue with EPA setting new standards albeit with greater flexibility that may be based more on political influences than legal standards. • Cellulosic standards would be set based on a number of factors—not just forecasted production. ─ What will the standards be in 2023 and beyond? • The “ethanol mandate” could be reduced. • Advanced standard must be at least the same percentage of the volume of renewable fuel as in 2022. • Biomass-based diesel standard cannot go below one billion gallons.

Eversheds Sutherland 24 Generating RINs on biogas

─ Sources • Landfills • Municipal wastewater treatment facility digesters • Agricultural digesters • Separated municipal solid waste digesters • Waste digesters ─ Fuel type • CNG • LNG • Renewable electricity ─ End use • Transportation fuel ─ RIN type • D5 Advanced Biofuel RINs (waste digesters) • D3 Cellulosic RINs (all other approved biogas sources above) ─ RIN quantity • 1 RIN for every 77,000 BTUs (LHV) • 0.903 (LHV to HHV conversion factor) • 11.72 RINs for every MMBtu ─ Timing of generation • Once converted to CNG/LNG/electricity, but best practice is likely upon demonstration of dispensing into vehicle • Industry practice is monthly

Eversheds Sutherland 25 Generating RINs on renewable diesel, jet fuel and heating oil ─ Sources • Used cooking oil and other waste oils • Tallow • Soybean oil • Sorghum • Sugarcane • Wood and wood pulp? ─ Fuel type • Renewable diesel • Biodiesel • Renewable jet fuel • Renewable heating oil • Sugarcane ethanol ─ End use • Transportation fuel, heating oil and jet fuel ─ RIN type – depends on the feedstock • D4 • D5 • D7 (comparable to D3s from biogas) ─ RIN quantity • 1.5 – 1.7 RINs for every gallon Eversheds Sutherland 26 RFS compliance overview

─ Registration • All obligated parties, renewable fuel producers/importers/exporters, and all others who own RINs must register their company. • Set up registrations, CDX, EMTS before activity begins. ─ Generating RINs • Five different types of RINs and four RIN markets • Approved feedstocks • Approved production processes • Proper quantities • Structuring a RIN generation transaction ─ Separating RINs ─ Reporting • Annual and quarterly reporting requirements for all parties ─ RIN validity • Burden on obligated parties to ensure validity criteria met ─ RIN retirement • Obligated parties • Renewable fuel exporters ─ PTD requirements ─ Recordkeeping obligations

Eversheds Sutherland 27 Investment Driver #2: California LCFS

Eversheds Sutherland California LCFS Compliance curves

Eversheds Sutherland 29 California LCFS (con’t) Drawing down of the credit bank

Fig 1. Total Credits and Deficits (MT) for All Fuels Reported Q1 2011 - Q1 2020

10,000,000

8,000,000

6,000,000

4,000,000 Metric Tons (MT) Tons Metric

2,000,000

0 Q2 Q3 Q4 Q2 Q3 Q4 Q2 Q3 Q4 Q2 Q3 Q4 Q2 Q3 Q4 Q2 Q3 Q4 Q2 Q3 Q4 Q2 Q3 Q4 Q2 Q3 Q4 2011Q1 2012Q1 2013Q1 2014Q1 2015Q1 2016Q1 2017Q1 2018Q1 2019Q1 2020Q1

Credits Deficits Cummulative Bank

Eversheds Sutherland 30 California LCFS (con’t) Credit prices have increased significantly

Eversheds Sutherland 31 $200 per credit price cap

─ Currently, there is a Credit Clearance Market (CCM) • Owners of LCFS credits may pledge their credits into the CCM if a regulated party does not retire sufficient credits • Credits within the CCM are sold at a maximum price of $200/credit adjusted for inflation (2016 is the base year). There is no requirement that sellers pledge to the CCM. • If there are not enough credits available in the CCM, the regulated party buying credits must purchase its outstanding balance (with interest) within five years, otherwise it would be in violation • CARB acknowledges the CCM only provides “moderate” price control ─ Effective July 1, 2020, CARB has implemented a “hard” price cap of $200/credit (adjusted for inflation, with 2016 as base year) • If insufficient credits pledged to CCM, then CARB will borrow EV charging credits from future years and issue them to utilities • Large portions of proceeds from sale of credits must go to support EV purchases • Max borrowing period of 6 years—unclear what happens after 6 years • Borrowed credits are recouped in years 7 – 11 • Parties cannot sell credits above the maximum price, even outside the CCM • Becomes a price support, in part, for EV sales in California. Non-electric producers will basically fund the price support since their credit prices will be capped • Unclear why the underlying fuel commodity would not simply become more expensive given the credit price is capped.

Eversheds Sutherland 32 California LCFS Ways to meet the demand for credits

CI of gasoline/ diesel

CI Standard

Eversheds Sutherland 33 California LCFS Ways to meet the demand for credits

CI of gasoline/ diesel

CI Standard

Eversheds Sutherland 34 Market is responding to demand Driver for renewable diesel and biogas/renewable natural gas

Eversheds Sutherland 35 Investment Driver #3: LCFS Programs in Other States

Eversheds Sutherland Drivers of RNG/Environmental Attribute Markets

• Oregon also has an LCFS-like mandate – the Clean Fuels Program – that is similar to the California program. • Other states are considering LCFS programs:  In New York, the NYS legislature has an LCFS bill in committee in both chambers, but it hasn’t been acted on since January 2020;  Colorado is currently finalizing a feasibility study assessing how an LCFS could help the state meet its GHG targets.  Washington has been trying to pass an LCFS bill for the last couple years, usually passing the House but being stalled in the Senate committee.

Eversheds Sutherland 37 Investment Driver #4: State Incentives and Mandates Other than for Transportation

Eversheds Sutherland Drivers of RNG/Environmental Attribute Markets

─ Some states have passed or are currently considering legislation that would permit natural gas utilities to purchase and distribute RNG, including some measure of rate recovery. ─ Washington passed a 2018 bill that established a voluntary program encouraging the increased production of RNG through tax incentives, among other things. ─ In Vermont, Vermont Gas Supply, the only gas utility in the state, has been permitted to purchase and distribute RNG and recently announced its plans to increase levels of RNG supply mix to retail customers to 20% by 2030, adding 2% RNG per year to its portfolio. ─ In Minnesota, Centerpoint Energy has long lobbied for a biogas pilot program. Recently introduced legislation in Minnesota aims to establish a state regulatory policy allowing natural gas utilities to add alternative fuels, such as renewable natural gas, to their distributions systems. ─ In California, SoCalGas announced a plan in 2019 to replace 5% of its fossil natural gas supply with RNG by 2022 and 20% by 2030.

Eversheds Sutherland 39 Drivers of RNG/Environmental Attribute Markets

─ A few notable states are looking at mandating RNG volumes, similar to an RPS for electricity. ─ Oregon: The Renewable Natural Gas Program adopted new renewable natural gas portfolio targets for natural gas utilities: 5% by 2020, 10% by 2025, 15% by 2030, 20% by 2035, 25% by 2040, and 30% by 2045. ─ Colorado: Considering a bill that would require natural gas utility portfolios to have the following RNG targets: 5% by 2025, 10% by 2030, and 15% by 2035. ─ California: Passed a bill requiring the Public Utility Commission to adopt biogas procurement targets for gas corporations, although the Commission is still in the process of developing said targets. ─ Nevada: Passed a bill requiring utilities to attempt to incorporate renewable natural gas into its gas supply portfolio sold to retail customers: 1% by 2025, 2% by 2030, 3% by 2035.

Eversheds Sutherland 40 Drivers of RNG/Environmental Attribute Markets

Regulatory Drivers for Using Biogas to Produce Electricity ─ Renewable energy credits (RECs) are generated under various state- mandated and voluntary programs; standards can vary significantly. ─ Many state renewable portfolio standards allow RECs to be generated when RNG is used to produce electricity. • Landfill Gas – 44 state programs • Anaerobic Digestion – 35 state programs ─ Eight states also allow thermal use of biogas to satisfy RPS obligations (AZ, MA, MD, NC, NH, OR, TX, WI); New Hampshire is the only state to require a portion of its RPS comes from thermal energy (2% by 2023) ─ LCFS Programs incentivize using biogas-derived electricity to power vehicles. The RFS may do so in the future.

Eversheds Sutherland 41 REC Prices for Compliance: Jan. 2012–Aug. 2018

Excludes SRECs. Eversheds Sutherland The Ohio RPS program was frozen in 2015 and 2016. 42 Voluntary National REC prices: Jan. 2012–Aug. 2018

Eversheds Sutherland 43 Investment Driver #5: Voluntary Demand

Eversheds Sutherland Drivers of RNG/Environmental Attribute Markets

Voluntary ─ Consumer interest (residential, institutional and commercial) as well as shareholder pressure in reducing GHG emissions and willingness to pay a premium to achieve these reductions have resulted in the voluntary use of RNG in a variety of thermal applications.

Eversheds Sutherland 45 David McCullough Partner T: 212.389.5064 [email protected] The Grace Building, 40th Floor 1114 Avenue of the Americas New York, NY 10036 T: 212.389.5000

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