The path to greater renewable natural gas demand in Texas, Oklahoma and Kansas runs through the states' factory floors and tech firms, according to One Gas Inc. executives.

The Tulsa, Okla.-based gas distributor is homing in on industrial and large business customers as potential off-takers for renewable natural gas, or RNG, projects that One Gas aims to develop. These customers could provide a crucial demand base that helps to drive uptake and collapse the cost of the pricey fossil fuel alternative.

"Everybody knows RNG is more expensive than wellhead gas, so you have to find a party that's trying to solve a different problem," One Gas Senior Vice President and Chief Commercial Officer Curtis Dinan said in an interview at the American Gas Association's virtual Financial Forum.

This problem is the challenge of meeting publicly announced goals for greenhouse gas emissions reductions, Dinan said. RNG is pipeline-quality biofuel refined from methane waste sources like farms and landfills. It presents a pathway to decarbonization, but it costs roughly $5/MMBtu to $15/MMBtu compared to benchmark natural gas prices of roughly $3/MMBtu.

Today, many participants in the RNG market realize the fuel's environmental value by trading in biofuel credits. One Gas aimed to provide an alternative by offering a direct conduit between RNG suppliers and consumers. Commercial and industrial customers are ideal off-takers because they consume large volumes of gas, Dinan noted.

"If we're trying to build demand, we want to focus on those that have emissions goals they're trying to hit — because they will take larger and larger chunks of the RNG gas that we're able to source," Dinan said. "It takes a lot of residential customers to equate to the emissions profile reduction that you can get with large industrial users."

The automotive and tech industries are top drivers of commercial and industrial growth for One Gas, according to Dinan, calling Austin, Texas, the company's top area for residential, industrial and commercial growth, underpinned by an influx of tech firms. These companies tend to be environmentally oriented, and Dinan said the company earned the right to supply at least one tech firm because of its RNG initiatives.

One Gas launched a partnership with Vanguard Renewables LLC in April to develop farm-based RNG projects across its three-state footprint. The first step is to assess agricultural resource potential, Dinan said. Meanwhile, the company is inventorying such potential at landfills and wastewater treatment facilities, the executive added. One Gas is in discussions with three cities about processing RNG from municipal wastewater treatment plants.

One Gas examined the potential to build RNG demand by working with state commissioners to integrate the cost of procuring RNG into its purchased gas costs, and spreading the expense among all customers. The company could also offer a green tariff that customers could voluntarily pay to support RNG development, but Dinan said this would likely be the slowest way to scale demand.

The company also sought to decarbonize its compressed natural gas vehicle fueling stations by integrating RNG. The company can realize the highest value in biofuels markets by displacing diesel fuel with RNG, Dinan said. That means focusing on stations that serve city buses, trash trucks and other short-haul vehicles that make single-day trips and return to stations for refueling at night, the executive explained.

The RNG initiatives are likely to form part of One Gas's emissions reductions strategy, which executives have told analysts and investors to expect in the coming months. Some gas utilities already announced net-zero or carbon-neutral goals without a clear blueprint for achieving them. One Gas President and CEO Pierce Norton said the company will not follow suit, and it will identify emissions reductions pathways.

"That's a little bit different approach," Norton said. "But we feel like that's more consistent with what we have always done in this company, which is say what we're going to do, and do what we say."