Andrew Littlefair: A higher, no doubt, a higher LCFS price helps the economics now. The economics aren’t negative, right? Payouts get stretched and what it does, Matthew, it’s why we’re, and I’ll talk here in a second, why we’re embarking on an optimization program to try to get the cost of these projects down a little bit. Because it’ll mean that you can move into smaller dairies, right? Because of the way the industry has been developing these dairies, a less modular approach, more field-directed approach is just costly. So it’s made it so that you have to target 5,000, 7,000. Look, we have a dairy that we’re so excited about that we’re building on and will throughout next year is 35,000 head, but there’s only a couple of those.
There are many thousands of dairies that are in the 2,000 head range and right now those are tougher the way one because of the cost and a contributing factor would be because of lower LCFS. So yes, as the LCFS price comes up, more comes into range. Now I’d say in general in the competition, the lowering of the low carbon fuel standard has made some of, we were in a little bit of a land rush, gun slinging environment about a year ago, year and a half ago. A lot of folks got into the business that maybe really didn’t have any business, because they saw the opportunity. And then things got a little tighter, and supply chain happened, and the cost went up a little bit. And then at that same time, the low carbon fuel credit collapsed. So it shook some out.
So I want to say that for those of us that need the RNG, we’re a bit unusual, we’re not building a project on spec and then looking to where we put it, we need it all. So we’re a bit unique in the business and for those of us that are in it like that, this is a good moment. And so, look, there are plenty of dairies if you know what you’re doing, I think. And we’re going to be, we are going to work hard in ‘24 to see if we can’t bring to market modular designs to bring the cost of these down so that we can then lower the cost of development of these dairies and therefore enter into lower, smaller size dairies, which then you open yourself up to a lot more targets.
Matthew Blair: Sounds good. And then it looks like the updated…
Andrew Littlefair: Hold on, Bob has got. Hold on a second, Matt.
Robert Vreeland: Yes, sorry. I just, if the question had come up on the CI score, what that looked like with the Del Rio going to Oregon. And so we went on a temporary pathway and it’s similar to California where that takes you to a negative 150. And that’s where Oregon was. But of course the pricing was much better in the process of basically securing even the temporary pathway is faster. So that’s where it’s at. The actual CI at Del Rio is anticipated to be much higher than that, or much lower, I guess. Anyway, let’s just set that straight.
Matthew Blair: Okay, and then, so it looks like the updated 2023 EBITDA guidance implies that Q4 should improve to call it 20 million to 25 million, so a nice step up from Q3 at 14 million. Could you talk about what is driving that improvement quarter-over-quarter?
Robert Vreeland: It’s mainly, Matt added fuel volumes that we’ve said our ramp is going to continue to go. We have a little bit on the RIN, although we’re also mindful of what the take has been, but the rent is there. And we’re being, frankly, I’m being, I won’t say conservative, but the LCFS is really where I took that, is where I kind of took that down to in the 60s. And so it is better, but it’s generally volume related along with the rent.
Matthew Blair: Sounds good. Thank you very much.
Operator: Your next question comes from the line of Pavel Molchanov from Raymond James. Your line is open.
Pavel Molchanov: Yes, thanks for taking the question. I’ll start with my usual Washington question. When are you guys expecting to get the Section 45Z transparency from the treasury? Is that a ‘23 event or do we have to wait until the new year?
Robert Vreeland: Yes, well, if it is the new year, Pavel, it’d be shortly thereafter. I mean we’re hearing by the end of the year.
Andrew Littlefair: I think we actually heard something finally, Pavel, that suggested it could be the end of the year, but then we heard a little something else that could be just after. So let’s put it there.
Pavel Molchanov: Okay, can we get an update on the Western Canadian JV?
Robert Vreeland: Yes, that’s where we stand with that and it’s a joint development agreement, but we have secured most of the property that we’ve got kind of five stations in [Indiscernible] one’s built and four others being built. And we’re kind of full speed ahead on that effort. And they’re just as excited up there about the 15-liter. It’s frankly probably even more needed there, but we’re just lockstep with our partner, Tourmaline, on that. And it’s a good environment up here with what we’re doing. So we are finding that some of the permitting and just the ease of getting these things going has been favorable.
Andrew Littlefair: So those will come on in the year and the good economics. Good economics. Very expensive diesel in Canada. And so the economics are really, really good.
Robert Vreeland: Yes, and so we’ll see probably, you know, most of those come on by in the second-half of next year, so not huge volume, not a 12-month volume contribution, but they’ll come on. And like with a lot of this is just to see that in a sense that this is happening and that’s really what we look to is like the volume will come. If the trucks are being ordered and bought, then it’s just a matter of time that they’re filling up at the stations.
Andrew Littlefair: Just one on a market thing, Pavel, last week there was a meeting at 27 different fleets in a room with the largest dealer in the region and Cummins reviewing the 15 liter. So, you know, I like that. There’s a lot of interest. And so we have great, you know, there’s work to be done there, but there’s we’re — we’ve got a nice advantage. And of course, Tourmaline is an excellent partner in that area in Canada.
Pavel Molchanov: Last question from my end about Cummins in fact, we’re still hearing from a lot of manufacturers, automotive and otherwise, about supply chain complications that are impeding, sort of, scale up of production. Maybe a better question for Cummins, but have you heard anything these lines regarding the 15-liter specifically?
Andrew Littlefair: Have not. They’ve been here, they’ve been pretty public here recently where they’ve been kind of almost uncharacteristic, kind of, talking about when they could be ordered, when they’ll start to be delivered and ramped. They haven’t been mentioning that, but I don’t know, maybe that’s factored into though. We have certain of our customers, though, like for instance, our refuse customers are behind on getting natural gas engines and it’s kind of funny natural gas trash trucks and it’s interesting it’s often it’s not the natural gas tanks or stainless steel tubing or the engines, its door handles and seats and supply chain issues that’s bottlenecked some of that. So there is still some of that working through. But we haven’t heard any, I haven’t heard that in these recent meetings and presentations by Cummins.
