Renewable Natural Gas Production Growth in the U.S.

Utilization of renewable natural gas, or RNG, in the United States has been growing at an increasing rate since 2022. While this growth could be attributed to many factors, the federal incentives provided by the Inflation Reduction Act (IRA) in 2022 seem to have provided the optimal environment for RNG to grow rapidly.

Renewable Natural Gas process

RNG is natural gas at its core, but where the gas differs from the traditional wellhead product is its source: biogas. Biogas is produced through the process of anaerobic digestion when organic material, such as landfill waste, sewage runoff, food waste, agricultural waste, etc., breaks down. Raw biogas has many contaminants and a generally lower methane content of 45–65%. To prepare for pipeline injection, the biogas must first be processed to remove moisture, carbon dioxide, and trace amounts of other contaminants. RNG injected into gas pipelines typically has a methane content of 96–98%.

RNG has been a relatively lesser-used source of energy for the past ten years, making up only about 0.03% of daily gas production in the United States. However, we must consider that RNG production is largely driven by source availability, while conventional natural-gas production can be scaled up simply by drilling more wells. Economics and policy decisions have a much more significant effect on RNG, as both these factors lead to more RNG adoption and, therefore, more RNG production.

Feedstock availability, however, may also be impacting growth. As of 2024, Argonne National Laboratory reported that landfills have the most RNG production by feedstock, representing 69% of all sources. This points to a second variable worth tracking alongside legislation. States with more landfills, farms, and other biogas sources may simply have more raw material to work with, regardless of any incentive structure.

History of RNG growth

Driven by the EPA’s Renewable Fuel Standard (RFS) and state legislation, such as California’s Low Carbon Fuel Standard (LCFS), RNG production saw a relatively large increase from 2017 to 2020. Unfortunately, a couple factors contributed to a stagnant period in RNG growth from 2020 to 2022. The Covid-19 pandemic caused supply chain shortages for RNG facility components, and the resulting oversupply from the initial wave of facilities caused credits to become undervalued. As a result, many companies were forced to reconsider their rapid expansion into RNG.

Following this stagnation, the past three years have seen a return to the previous trend of increasing RNG production. Since 2023, there have been ~20 new RNG production facilities coming online per year, an increase from an average of ~4 per year before 2023. That buildout has pushed average daily flows up to 105 MMcf/d in 2026, a 162% increase since 2022. While this number is not nearly as high as overall natural-gas production, it shows a meaningful acceleration for RNG in particular.

What is the reason?

Our initial hypothesis for this growth was mainly tied to legislation. We expected to see a higher proportion of RNG facilities within states with RNG-positive legislation. However, when we evaluated the states with RNG incentives versus states with high amounts of RNG facilities, we saw very little correlation between the two factors (see map below).

Colorado, California, and Illinois have legislation favorable to RNG production and have counties with high production. Interestingly, though, their RNG-positive legislation and high production numbers make them notable exceptions in our analysis. Despite not having RNG-positive legislation, Texas, Pennsylvania, and Ohio all show high production relative to the rest of the country. Some of their counties are even providing some of the highest production numbers in the country. With the exception of Colorado, Illinois and California, states with a higher-than-average number of RNG facilities do not seem to have RNG-incentivizing legislation. This evidence leads us to believe that state-level legislation is not impacting U.S. RNG production as much as we theorized, but we also wanted to consider federal-level legislation as another potential reason.

Inflation Reduction Act’s delayed but powerful impact

One notable change from the past five years was the creation of incentives provided by the Inflation Reduction Act (IRA) that passed in 2022 under the Biden administration. The incentives came in two forms: the Clean Fuel Production Credit (Section 45Z) and Methane Fees. The credit provided a more positive incentive, offering a tax credit to entities that produce RNG, while the fees penalized facilities for venting or flaring methane. This combination made RNG a potential revenue opportunity, as well as a way to avoid EPA fines. The result was what we highlighted in our initial graphic, a 162% increase in RNG production since 2022.

As noted earlier in this analysis, this is not the first time policy has been pivotal to RNG production growth. The RFS and LCFS both correlate with the production jump seen before the IRA was passed, but recent history has proved that the federal policy incentives affecting RNG carry much more weight than any state-level policy has to date.

The path forward for Renewable Natural Gas

With the Trump administration's well-documented aversion toward renewable fuel sources, many assumed that the 45Z tax credit would be eliminated by the Big Beautiful Bill in 2025. However, the legislation had the credit extended through December 31, 2029, with hydrogen and carbon capture credits also kept alive, most likely due to job opportunities and economic growth in rural areas. In fact, GOP lawmakers have consistently lobbied to protect credits that benefit jobs in their districts. The same result seems to have happened for RNG, allowing growth potential to remain unaffected.

While RNG does not encompass a large share of natural gas production, this industry's potential growth will be interesting to monitor in the coming years. The continued federal credits should provide incentives for more facility creation and, thus, more RNG flows.

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