Betty Zhang: Okay, great. Thank you. And then in terms of what you mentioned about the dairy farms and how there are some challenges financially, do you think that could have any impact on your RNG volumes?
Robert Vreeland: Well, I mean, the Idaho situation, that — I mean that could have some timing delay. Push out the rest of it. No, I mean, we’re proceeding, we’re producing, we’re injecting gas. We’re kind of in that early ramp-up stage on all those. So, no, in fact, really as these things get going on, you’re providing a revenue stream to the farmers. So I mean, these are really actually a good thing for the dairies. So there may be some delay there for the one project.
Betty Zhang: Got it. Thank you.
Operator: Thank you. Our next question will come from Pavel Molchanov with Raymond James.
Pavel Molchanov: Thanks for taking the question. I remember a year ago, you provided this math that for every, I think it was 3,000 trucks, Class 8 trucks running on RNG, your fuel sales would go up by 10% or something like that. Is that sensitivity still accurate, given everything that’s happened since then?
Andrew Littlefair: Wow, Pavel. 3,000 trucks is 45 million gallons. 45 million gallons on the 250 million gallons, 300 million gallons that we do. So that’s in that range. I mean that’s the kind of — that’s how that sort of backs up 3,000 trucks are important, right. We’re doing not quite that many Amazon. That volume sort of consistent with what I just mentioned. I think what we talked about is what Cummins has said is that they expect that it could be in the first year of orders that the X15N could see something on the order of 3,000 orders. Probably what I shared with you Pavel or others is that we’ll get a disproportionate share of that volume because of our network. And we hope that in subsequent years, the numbers go up.
I mean, the way to think about it is these heavy duty trucks with these new engines, especially with 15 liter, will use 15,000 gallons per truck. So you get up to 10,000 trucks, which would be a very small penetration. Let’s call that in a couple of years from now, very small penetration on the quarter of a million Class 8 trucks that were sold on an annual basis. That generates 150 million gallons. And we have a very high market share of that. So that’s really meaningful for us. It’s really keeps us — we’re very optimistic about our business and why we’ll need more and more RNG. So we’re just beginning to see these engines come to market. And so I’m very hopeful that we’ll see the uptake like we hope.
Pavel Molchanov: Okay. Let me follow-up with more of a kind of a conceptual question. With this AI data center euphoria, there is more and more talk about biogas going into the data center space as gas, right, without being turned into RNG first. What are your thoughts on that?
Andrew Littlefair: Well, the best use of RNG is certainly low carbon. Low CI RNG is in transportation, which is hard to carbonize market. And I understand what everybody is striving for is they obviously bringing on these power, the power draw, the power sync of this AI. It’s breathtaking. And so they want to have as benign fuel as they can as low as carbon fuel as they can. It’s not necessarily the most economic and the wisest place to put your most coveted low CI gas. It should go into transportations, where it generates the most amount of credits. So, yes, some landfill gas, a lot of landfill gas may end up opting into the stationary market. But we’re talking to all the different producers now, and you’d be surprised of RNG.
Many of them that used to talk a lot about stationary sources want to bring it to the transportation market and eventually want to bring into the transportation market for hydrogen, not only for RNG, for the vehicle. So there’ll be a lot of pressure on RNG. The good news is there’s probably 7 billion gallons to 10 billion gallons of RNG. That’s, I think, eventually over the next decade will come to the market. The lowest of that CI gas will come to the transportation market, won’t be going into the AI fixed power centers.
Robert Vreeland: But I thought where you were headed, Pavel, and I was thinking, wow, he’s going to throw me a softball. This just puts more pressure on the electric situation. We didn’t already have enough power for the heavy-duty trucks to go to battery. I think the market is beginning to understand that. So I’m so excited about being in the position we are with RNG that can act today in a heavy-duty truck, because when you all of a sudden increase the demand of electricity in United States by 20%, you just used up what you needed for heavy-duty trucks. And so it’s just making the situation worse for power in America to be able to do all things, every light-duty vehicle, every heavy-duty vehicle, and now, 20% for AI, you don’t have the power. And that’s, I mean, just read the Wall Street Journal. They had a pretty good story out of yesterday. So I like how we’re positioned relative to using a battery in a heavy-duty truck.
Pavel Molchanov: All right. Thanks very much.
Andrew Littlefair: Okay.
Operator: Thank you. Our next question comes from Craig Shere with Tuohy Brothers.
Craig Shere: Hi. Good afternoon. Thanks for taking the question.
Andrew Littlefair: Hey, Craig.
Craig Shere: So you point out that there are higher costs. It takes longer to complete projects. Obviously, for now at least, the LCFS cash flows are much lower than anticipated 12 to 24 months ago. I’ve kind of back to the envelope guesstimated that we’re looking at projects maybe in the seven times EBITDA when they’re finally online now, and that doesn’t count cost of capital during construction. So you’ve acknowledged all this. I’m a little confused about a few things, though. The first is, obviously, you’re a strong hand, you have good relationships, and I don’t think any of us expect LCFS to stay where they are. But is this new Maas relationship taking away your interest in direct acquisitions? Because it seems like in the market I just described, that there’s some weaker players that just have to fold and they can’t last another 12 to 24 months.
Andrew Littlefair: I think you’re right. But Maas doesn’t take away from that. We’ll get a crack at some of those. I think you’re right. Some of those will come to market. There needed to be some — I’m just being candid, Craig. There needed to be some market therapy, which I think is going on. And some of those projects will come forward. And we know all of them. We’ve looked at them, but we’ll get a crack at those too.
Craig Shere: Okay. And then the next part of the question, because it was interesting, because it sounded like Maas was additive, but I heard you say, and I forget who asked the question, but saying that basically Maas is moving to the top of the list. And I’m wondering if, because the economics, you’re starting to slow walk what you had expected to be doing with BP and Total 12 to 18 months ago.
Robert Vreeland: No, that’s that — the — I mean, the activity within those JVs is constant and hasn’t changed. We’re also able to do some of these on our own, if that’s the way it works. So I think all of it’s kind of firing on all cylinders really to get more volume.
Andrew Littlefair: It’s just — I wouldn’t read any more into it other than it’s additive. It’s just a great opportunity that’s working with a well-known, very good developer. We talked to them for a long time about doing it and we finally were able to get this together and we’re excited about it.
Craig Shere: And your JV partners, they have a right, but not an obligation to do the projects that you guys have kind of been circling up together, is that right? So to the degree they say no — I think we got to take a pass for the next six months until the market settles out. You can pursue it on your own.
Andrew Littlefair: We’re able to pursue them on our own.
Robert Vreeland: Yeah.
Craig Shere: And are the — recognizing there’s a difference between where the ball is and where it’s going. Is that roughly seven times EBITDA and current market conditions after a delayed completion process versus what was expected a couple of years ago? Is that roughly where we are? And given your stable economic position, are you comfortable independently investing on that basis, thinking there’s just no way CARB is going to leave LCFS at $50 to $60, 18 months from now?
Andrew Littlefair: Well, let me — I guess I’m not going to use your EBITDA number, okay. But let me talk about the second part of the question first. I think it would be safe to say that we believe that the LCFS price will normalize and will be higher in the future than it is currently. And we don’t — we’re not modeling these projects thinking that we’re getting ready to have a 20-year $50 LCFS price. So we do believe that they’re going to correct the obligation curves, which should begin to work off the overproduction — the oversupply of credits and we’ll see those credits strengthen. So we’ve got that factored in, as do our partners that we’re working with. And so we’re optimistic about the way that’s going to sort out.
Craig Shere: Yeah. All right. I mean, all these deals are, they are — have their own unique aspects to all of the deals that are out there in the market. So it’s not really prudent to —
Andrew Littlefair: Craig, I think the way to look at it, and maybe I just do it simply, is while you started out your question by saying, I said that the projects were a little bit more expensive, take a little longer, blah, blah, blah, that kind of thing, we saw a little bit of inflation and all that’s true. On the other hand, we didn’t have the IRA and we didn’t have the PTC and we didn’t have the ITC. So all things — now look, if you were to tell me that it was going to be $50 LCFS for the — over the long haul, then this wouldn’t apply. But if you think that that’s going to normalize at something higher than that, then all things kind of being equal, these projects are similar — the economics are similar to what they were when we started in this, not quite to where they were when you had $200 LCFS, but in the kind of the similar ballpark.
We have a threshold with our partners and with our Board of how we deploy the capital and it has to meet that and otherwise, we don’t do it. So you should assume that these Maas projects meet that threshold. And so that’s why we’re moving forward with them right now.
Craig Shere: Sounds good. Hopefully a quick one here. In terms of the delayed coming online and actually getting cash flows because of when the carbon impact is certified and you can sell LCFS and whatnot. Is getting — is the timeline for major equipment procurement and availability of major equipment procurement of accreditation for the credits connectivity pipelines, is this — in your view, saying the last six months, is this now stable, starting to improve or still getting worse?
Andrew Littlefair: Yeah. No, I think the — well if what I was hearing you saying, I mean, the long lead items and some of the pressure that we saw because of supply chain, that’s normalized. We are working really okay. So that’s one. The pathway is still too long, right. The certification process is still way too long. We are working hand in glove with the staff at CARB to get that shortened. And we’ve made — we’ve had meetings with the highest levels of government to talk about that. I don’t think we have any pushback on that. I think all want to shorten that up and it needs to come in dramatically. And so I’m hopeful that here in the next few months, it will become clear that they’ve made some changes to the process and will shorten up that timeline, which will be helpful for everybody because what we’ve got right now is not workable.
I mean, you don’t do that in anything else. You don’t build skyscraper and then keep it vacant for a year and a half. It’s crazy. So I think, though, that’s generally understood now as just kind of getting that backlog worked off and kind of changing the process to bring that in to something that makes a lot more sense.
Craig Shere: And physical pipeline connectivity?
Andrew Littlefair: That kind of depends on how far you are and who you’re working with and which utility and which pipeline. And that’s never as fast as you like, but that should be — shouldn’t be a gating factor on these projects. Can be — you’re not going to change that. I mean, look, we — I’m looking down the table at one of my fellows that’s built 200 fueling stations. We run into that problem with utilities making meters, okay. And that’s just the way it is. And so, I would say your pipeline connectivity is six months to a year and that’s never going to change. But that should be within the timeline of the construction project. And when it’s way outside of that, then you got a hot case.
Craig Shere: That’s helpful. Thank you.
Operator: Thank you. Our next question comes from Jason Gabelman with TD Cowen.
Jason Gabelman: Yeah. Hey, thanks for taking my questions. The first one’s just on upstream EBITDA cadence. This quarter was a bit better than expected, but you didn’t change full year guidance. It sounds like it was related — I couldn’t really tell if it was project construction getting to later something else. So should we expect that EBITDA to move more negative in 2Q as you ramp up construction activities and other things going on in that segment? And then does this Maas joint venture have any impact to that?
Andrew Littlefair: No. Jason, we should see an increase kind of ramping throughout the year on that — on the distribution side to the business so we are not very —
Jason Gabelman: Sorry, I wasn’t — yeah, not the distribution side, the upstream side of the business.
Andrew Littlefair: Okay. So what then —
Jason Gabelman: Drag. Drag it worse.
Andrew Littlefair: Yeah. Well, it will. We will see some of that. Yeah. So as we — we talked about on our last call that a lot of that loss would be in the first part of the year. So it’s going to move out a little bit. So you’ll see some of it in the second quarter.
Jason Gabelman: Got it. And no change from the smallest joint venture to that guidance?
