One Gas Inc. is expanding its plans for renewable natural gas projects after a study identified 175 Bcf of potential renewable gas feedstock across the company's three-state gas utility footprint.

One Gas has 22 projects for renewable natural gas, or RNG, moving through the negotiation, design, and advanced evaluation stages, executives said during a Feb. 24 earnings conference call. As of November 2021, One Gas had nine RNG projects underway.

Many of the projects originated from the company's partnership with Vanguard Renewables LLC to develop or expand RNG facilities at farms in Kansas, Oklahoma and Texas, according to One Gas Senior Vice President and COO Curtis Dinan. After identifying the 175 Bcf of RNG feedstock through the partnership, One Gas determined which prospective projects had the most potential and were best situated relative to its distribution system, he said.

"We are very excited ... about the opportunities that are presented to us because of the location of our infrastructure and its proximity to the feedstock that supplies RNG," One Gas President and CEO Sid McAnnally said. "We are fortunate to be in the territory where we really don't have to go outside our footprint to look for supply. It's readily available."

RNG to help achieve emissions reduction goals

One Gas is exploring low-carbon hydrogen blending as a long-term decarbonization pathway, McAnnally said. But RNG — a natural gas alternative processed from methane waste at farms, landfills and other facilities — has presented a near-term opportunity to leverage One Gas' infrastructure in the transition to cleaner fuels, he said.

One Gas will seek to cut greenhouse gas emissions from its distribution system by 55% from 2005 levels by 2035. The company aimed to reduce Scope 1 CO2-equivalent emissions from its operations by 41% from 2014 levels by 2025.

Many of the regional RNG facilities are small-scale projects that do not require high-pressure transportation, Dinan said. This could give an advantage to low-pressure gas grid operators like One Gas, which can connect to these facilities without the need to add compression assets, he said.

Three of the RNG projects are in final negotiations for interconnection design, and seven are in the interconnection design phase. One Gas is in the advanced stages of evaluating another 12 interconnections to RNG facilities, Dinan said.

Higher capital spending and projected growth

One Gas plans to invest $3.5 billion in capital spending over the next five years, up $500 million from its previous plan, One Gas Senior Vice President and CFO Caron Lawhorn said. The company expects rate base growth of 8% to 9% over the period, she said. One Gas also forecasts annual net income growth at 8% to 10%, driving EPS growth of 6% to 8%, she said.

Dinan outlined three pillars driving the growth: continued investment in the existing gas grid, system expansions to meet customer growth in Oklahoma and Texas, and government-required asset relocations to accommodate other infrastructure expansion, including bridges and highways.

On Feb. 23, One Gas reported fourth-quarter net income of $60.5 million, or $1.12 per diluted share, topping year-ago EPS of $1.09 and matching Wall Street's expectations. One Gas posted full-year 2021 net income of $206.4 million, or $3.85 per diluted share, which also matched analysts' expectations and was up from 2020 EPS of $3.68.