Mike Stivala: Yes. So as I said earlier, Jay, pricing right now — first of all, we’re still building out capacity for RNG. So I can’t answer the question about the potential for how much of that RNG is going to be tied to something that is volatile, okay? There’s — as I said earlier in one of my responses, there’s lots of different markets that are developing the need to replace traditional natural gas in different aspects of the economy, whether that’s transportation, whether it’s in energy consumption for industrial uses. People are looking to lower their carbon footprint. And one way to do that is to move to a renewable a renewable product such as renewable natural gas, which can be a direct drop in replacement. So we did not look at this deal as an opportunity to take advantage of LCFS credit values, honestly.
There is volatility in that market. We understand that. We generate LCFS credits in our propane business. So we already have an active process internally to manage those credits, and we understand how those markets operate. But I think what we’re seeing is — and I’m sure you’re aware, there’s been a significant pullback in LCFS prices from, say, $150 a ton to somewhere in the mid-$60 per ton in California. The good thing is, is all that occurred sort of before we were able to execute this deal. And I would say we were never going to be paying a value for a business off of $150 LCFS price anyway. But the market did correct itself in a time frame that allowed us to sort of stress the business for those things. But I think as more markets and more demand for a renewable product such as this develop there’s either going to be more LCFS markets in different states that we’ll develop.
I know there’s an active — there’s active legislation in several states that may adopt such programs, which could be beneficial. But I think the way we’re going to be looking at the business is actually more with a propane market eye towards how to make money in this business. And that is being a trusted provider of that energy to the customers that are seeking a lower carbon alternative. And so it may not just be selling it to one off-taker like we have in Arizona, that’s going to put it into a transportation market. There could be direct fueling into fleets with customers that we have in our propane business as an example. So I think the opportunities that we see in the RNG space are bigger than just taking advantage of environmental attributes, okay?
Environmental attributes are there to sort of kick-start a renewable market I think we’re getting in at a really good time to get some visibility to more uses that are developing to effectively make the natural gas price, the pure price for the gas that we’re selling to make these projects make sense in their own right. And then with credits available, it certainly enhances returns. But I think if we continue to think about the off-take in a more propane-like way, I think that’s going to benefit us in really growing and developing this market.
Jay Kanive: Understood, and I appreciate that. But maybe specifically with respect to the Arizona facility, which you said has a current off-take agreement based upon market pricing. What I’m trying to get an appreciation for us, what is that market pricing today that you’re getting for MMBtu of RNG versus looking at natural gas at $250. And what is your ability under that current contract to hedge that to hedge that premium that you get for that RNG? Like are you able to go out and hedge that for any length or period of time as you transitioned, as you were stating to all these different various uses or growth opportunities, you have to do something different than just straight commoditize and sell the RNG?
