Clean Energy Fuels Corp. (CLNE) Earnings Call Transcript & Summary

Good morning. I'm Raleigh Gerber, Director of Corporate Communications at Clean Energy. Welcome to Clean Energy's RNG Day, and thank you for joining us. Presenting this morning will be Andrew Littlefair, our President and CEO; and Robert Vreeland, Clean Energy's Chief Financial Officer. After this presentation, they'll be joined by Will Flanigan from our Renewables Group for a Q&A session. Before we begin, I'd like to direct your attention to our safe harbor statement and non-GAAP financial measures. We will be making forward-looking statements during today's presentation, including about our strategy and expected financial performance. It's important for everyone to read our safe harbor statement on Slide 4, pertaining to these forward-looking statements being made as part of today's presentation and the more detailed risks and uncertainties that may cause actual results to differ materially, which are disclosed in our most recent Form 10-Q filed with the SEC. Additionally, it is important to read Slide 5 regarding the use of non-GAAP financial measures in today's presentation. These non-GAAP financial measures include adjusted EBITDA and adjusted net income loss. A reconciliation of adjusted EBITDA and adjusted net income loss to our GAAP net income loss can be found in the appendix of today's presentation, beginning on Slide 50 through 52. A copy of today's slide presentation is also available in the Investors section of our corporate website. Now let's go ahead and get started with a brief video. [Presentation]

Good morning, and welcome. We've been really looking forward to sharing our RNG strategy with you. And as you know, we have embraced RNG and are the leader with RNG in transportation. We plan to jump right in. And afterwards, Bob, Will and I will take your questions. Bob and I plan to be specific. We haven't shared much of this before, and we will lay out our 5-year RNG plan, and I'll use these topics as a guide. So let's begin. Who we are? I think most of you know that we are the largest in the heavy-duty alternative fuel provider in North America. We sell the most fuel. We have the most customers, and we have the largest nationwide network. But some of you aren't sure how to think of us with RNG over the longer term. We are different than most in the RNG industry because we are integrated. And so let's look at that. We have RNG supply, today we already have about 50% of the RNG market. But we're getting into the production side of dairy in a big way, and we'll describe that in a lot of detail here in a few minutes. Supply is key. All of our customers want RNG. But what's really important to keep in mind is our distribution system sets us apart. You do not monetize the environmental credits until you get the fuel to the nozzle tip and so that's very important to keep in mind. We have about 800 fleet customers, operating 1,000 of vehicles daily, and we have 60 stations under construction so we're vertically integrated, which makes us very different, and we have great experience because we've been in the business for 25 years. We've all but invented RNG as a commercial fuel. But why RNG? RNG has many powerful attributes and I'll use this as a guide. We won't cover all of them in great detail, but I first want to talk about sustainability. It's really key, as fleets begin to look at how they reduce their negative carbon intensity, they really begin to focus on RNG. And I love this slide because I think it does a great job illustrating how powerful and how low carbon, the low carbon intensity that RNG can be. So on the left, this is from the California Air Resources Board. On the left is the baseline, which is gasoline and diesel. Then you see hydrogen at about 41 above the line, electricity at 15 and then you have RNG from landfills, but then look way to the right where you see dairy could be a negative -- as much as negative 500, many of the projects we're bringing on right now are minus 350. And so when you think about it on a carbon basis, we're 5x cleaner than electricity. And that's very important to keep in mind. RNG is renewable. It's really the epitome of a renewable fuel. It's organic. We capture methane, which would otherwise be going into the atmosphere and we put it into a vehicle. Other alternative fuels are manufactured and so they really can't be a negative carbon. Often I'm asked, though, that's great, Andrew, but is there enough RNG? And the answer -- the short answer is yes. This -- these numbers come from internationally recognized study. And what it shows that over the next several years, there's about 20 billion gallons in the low case of dairy RNG available and moving up to about 2040, where you could see as much as 3.5 billion to almost 4 billion gallons of RNG. And when you look at all of the RNG, wastewater all the different animal manure landfill, you can approach 15 billion gallons in the low case and then over time, it could be much higher than that. And so when you think about it being 5x cleaner let's just say you get to 4 billion to 10 billion gallons. What you're doing is you're -- because you have that 5x multiplier, you're actually reducing almost all the carbon that's coming from diesel in Americas operations today. Now there are other properties that are very powerful. We don't talk about tailpipe emissions that much anymore. But if you look at these RNG operating a natural gas engine, they're 90% less NOx. They're quieter than the diesel engine and probably most importantly is our fuels are drop in fuel, and it's utilizing America's pipeline network. That's already in place. And so you hear many of our friends in the alternative fuel space with other technologies, talking about building out a new nationwide network, our's is already in place, which makes our fuel affordable. We can deliver this RNG at the equivalent cost of today's diesel prices. And it's proven. Amazon wants RNG, UPS has $150 million gallon contract with us, it's already in place and we're serving transit properties across the country like L.A. Metro and New York City transit already on RNG, which really brings us to the point is the value creation for Clean Energy. RNG drives increased revenue, our income and adjusted EBITDA. And I'm going to ask Bob to go ahead and talk more about how much we can earn from it.

Okay. Thank you, Andrew. What we can earn, I'll tell you, this is a big -- 1 of the big reasons why we are here today to talk about the 2 sides of our business, the RNG supply and the distribution and what each of those will contribute to the vertically integrated Clean Energy. Now I'll start with a little housekeeping on this slide. On 2022, I will discuss that in more detail at our earnings call, which we anticipate being February 24, by the way, save that date, we'll get a press release out on that soon. And I'll also give you a couple a couple of assumptions that are underlying this. There are many, but maybe the more meaningful top of mind assumptions would be relative to the RIN and LCFS pricing that we've assumed for this look. On the RIN, we have a relatively flat curve, but still very bullish with that program at the pricing on that is about $2.85. And the LCFS is also a bit of a flat curve, albeit in 2022, starting a little bit lower at $165 but averaging out in this model at about $185. Okay. So let's look over here at the RNG supply. This is the business that we stood up about a year ago with our joint venture partners. And these are equity method investments. And what you're seeing here will be our share of the results of the GAAP net income as well as our share of the results of the adjusted EBITDA. And that GAAP net income, of course, will come through as kind of a 1 liner in our income statement. And the adjusted EBITDA, we will make a combination with our adjusted EBITDA reconciliation. But significantly, you can see that we go from today 2022 up to $173 million of net income just from the RNG supply side of the business and with an adjusted EBITDA of $250 million. Now on the distribution side, we're seeing significant contribution from the distribution side. And these 2 sides of the business really feed off of each other. I think that's just such an important point here is that the distribution side is creating and has a demand bucket for the RNG supply. So it creates value for the RNG supply and then the RNG supply has a built-in recurring volume demand bucket in our distribution side. So the 2 go together, and it's just important to understand the contribution and you can see it here of $112 million of GAAP net income and then adjusted EBITDA on the distribution side of $305 million in 2026. The last point that I'll make on the distribution side that's embedded in here is important is on the alternative fuel tax credit. We have assumed that the alternative fuel tax credit will remain. The proposed legislation right now is that it's -- that it will remain for -- it will be extended for 5 years, and that's embedded in the distribution side of this. But together, the powerful part here as well then is together, the 2 businesses generate $555 million of EBITDA as we see it in 2026.

Okay, Bob, thank you. Let's look at supply because I think that's what people want to understand is how this will really come on. We are now focused very clearly in the near term on dairy on RNG coming from dairies because, as I've said, is the negative carbon intensity of that fuel. We'll produce RNG with our investments with our joint venture partners of Total Energy's and BP. And what's important to know is that all the gas we produce goes to Clean Energy, right? So we get all the gas for the demand that we're creating. And of course, as Bob just indicated, the RNG and our operations enhances our overall economics. At the same time, over the next 5 years, we see tremendous growth of third-party RNG. We need really today all the RNG we can get for our customers. And what's interesting, because we have those [indiscernible] nasties because we monetize the RNG, we get to look at almost every deal that's being developed because we're the offtake and so it's really important. And I'm going to ask Bob to explain in a couple of minutes about how we can leverage our California infrastructure. Bob, though, before we get too far down the line, talk about how our joint ventures are operating, how they're organized and how they're funding.

Okay. Sure, absolutely. So our joint ventures is fairly well known. I'll recap a little bit. Up to this point, we've really just kind of known what our commitment is and how big of a commitment to the joint ventures are targeting. So with Total Energies, we've committed $50 million of equity that could go up to $200 million. And with BP, we committed also $50 million. We've contributed the $50 million already to BP, and we will fund the Total energies joint venture as we close on projects. But more importantly, today, the new information, if you will, is, well, how is the pipeline? What do you -- what's that look like? And I'll say the pipeline in a short -- relatively short period of time in about a year, look very well in our opinion. Total Energies, the pipeline there is $400 million plus in dairy projects, $400 million plus and BP at $650 million plus in pipeline. And when I say pipeline, I'll define that as with -- today, I find it important to give you a pipeline that has certainty, that is deals that are in construction, deals that we have some kind of letter of interest on or we're in some form of negotiation. So this is not growth. There will be additional growth because we're not going to stop spending here. We've got very motivated partners, and we're very motivated. Now billion dollars of investment, which we've talked about, as we've had some of our conversations just doing the math with the amount of money that would be committed by the partnerships and assuming some leverage at the projects, you get up to the $800 million or the $1 billion. Well, I'm happy to say that our pipeline is supporting $1 billion. Now -- the -- on the capital front in terms of -- because that's obviously much larger than our equity investment and what the totals are there for these joint ventures. But -- so at the moment, we'll see principally debt financing on this for the -- for this capital outlay. In 2022, we'll take on a modest amount of capital in our estimate in the $150 million range, $125 million range to support essentially kind of a construction period that's going on. But as these projects come up and are operating, we feel very good about the ability to get the project financing. Where that project financing will sit on -- our balance sheet is not completely determined, meaning could it be at the project level in the joint venture or would it be at clean energy and to be determined how that goes. But certainly, it will be based off of a portfolio of projects, if you will, to pay for that. Now that the joint ventures, of course, is a great source of RNG for us, but we, at the present our demand is much higher than that. And so this slide here gives you an idea of where we see the supply of RNG, how we see that growing in total. I just spoke about the clean energy produced Dairy RNG -- and -- but I also mentioned that there would be growth in that area. So we've assumed growth in this model, which is prudent because, again, we're not going to stop spending. So we take by 2026, we take the RNG volumes that we're producing to 105 million on this chart. That's -- that would be the volumes produced by us and our joint venture partners. And then the third party supply contracts, which we have the numerous suppliers. You see they're growing up to about 369 million by 2026 bringing the total RNG supply of 474 million gallons.

Okay. Bob, thanks. So this is where we stand today. I think it's just kind of an easy way to think about it. In the 9 months, I think Bob is exactly right. It's been impressive the growth. I'd like to give a call out to our origination team with Clay Corbus, Will Flanagan, Tyler Henn. They've done a tremendous job with our joint venture partners, bringing on this growth. So we have 50 million gallons of projects that are underway this is kind of how it breaks down. Is there's 5 projects under construction, 3 more will start very soon, 13 more have already been signed, and there are 15 projects that are under negotiation as we currently speak. And here's a great example of one, and I hope you had a chance to see this announcement this morning. It's the Millenkamp Dairy. This dairy is 1 of the largest in the United States, operated by a world-class dairyman, Bill Millenkamp. It's a $130 million project -- it's expected to produce just about 5 million gallons annually. I like to think that Bill chose Clean Energy because what we brought as a partner to the development of this project. And I think what -- some of the things that we have separate us from others in the business. We moved quickly. We have funding available. We have big smart partners that bring capability and technology assessment to these projects. We're long-term owners. And we're not brokers. We need the gas, we want the gas or a perfect offtake partner. It's really farm to fleet. And I like to think that these large projects will draw other dairies in, and so we're just getting going on the dairy RNG front. RNG is really the best renewable fuel no matter what the technology. So we're preparing for today, and the middle, medium term and the longer term. And so today, we're taking RNG, and we're bringing it through the national pipeline system to our stations to the vehicle. So Amazon wants a 100% RNG as does UPS for the vehicles that we fuel. But someday, there isn't a better carbon negative intensity fuel than RNG. And so what you'll see is you'll use the pipeline system to bring RNG to our stations when the reforming hydrogen reforming technology is ready, you'll reform the RNG to hydrogen and you'll put it into a hydrogen fuel cell truck at our stations. And in fact, already today, we've made an investment where alongside BP with BTR Energy, where BTR Energy has developed a software where they can track molecules of electricity actually from RNG right into the vehicle and that way, get to participate in the low-carbon fuel program. And so we really see RNG as the best low-carbon fuel that will fuel no matter what technology ends up coming along in the future. And to that, in the future, we're already working with 1 of our long-time customers foothill transit to bring hydrogen to their property. And about 1/3 of the fuel that we'll actually produce for foot hydrogen will be with RNG. But we're seeing more transit properties begin to look at hydrogen as they test out their fleets using this other alternative fuel. And I think RNG will be the feedstock for it in the future. Now I want to focus on the distribution business because it's really the key of how we create the demand for RNG. And this slide is really little bit of an index slide to kind of keep me on track. But today, we have this large network. And as I said, it is what makes us monetize those environmental credits. So it's very important. And when you look at our national wide infrastructure, it probably would cost $2 billion today to replicate what we've already built. Our stations already have the capacity to take about another 400 million gallons of RNG without spending hardly any other capital. And as I said earlier, we're already right now building 60 more stations for customers to augment this nationwide network. When you look at the other important thing that customers want as they look to us, it's the portfolio that we have of our RNG. We're working with nationwide customers. And they want to be able to put their fleets across the country, and they want to know that they can rely on us to provide them RNG. They don't want to be hooked up to just 1 particular farm, and we're able to do that because we have a portfolio of RNG supply. And you see here that in 2022, we'll deliver about 194 million gallons of RNG, 128 million in California, but we've reached all the way to New York, and we're providing RNG in Texas. I think it's important as we've pivoted to RNG over the last few years. Today, 73% of all the vehicle fuel we sell is RNG. And that's impressive, but there's more to be done. As we look at the drivers to creating the demand for RNG, it's a lot of what we know, we're working with truckers and they have big fleets. And these vehicles use up to 15,000 to 20,000 gallons per vehicle of RNG a year. And so it doesn't take millions of trucks. to get to a very exciting point. It's really a couple of thousand trucks here and there, and that's what's embedded in our 5-year plan. But as these fleets begin to look at how they meet their sustainability goals and how they reduce their carbon, there really isn't anything that could be cost-effective and as powerful as RNG. Amazon wants 100% of their vehicles operating in RNG, and we're seeing other significant fleets like Estes and UPS also very committed to RNG. Let me give you an example of how this really plays out. And I've had this personal discussion with the Chief Sustainability Officer of 1 of the nation's largest fleets. They have a self-imposed goal to reduce their carbon by 50% by 2034. And we showed them by moving 1,500 vehicles over to RNG in California where they operate. They have a big fleet in California as well that they can actually meet their 2034 goal 10 years ahead of schedule in the next 2.5 years by operating 1,500 other trucks at almost over 15,000 on RNG. So it's very powerful. And I think this is something that other fleets will begin to replicate. The other thing that will be the driver for us as we move forward over these next few years as a good example is us optimizing our customer base and look no further just then our Refuse business, Today, we actually sell fuel to about 132 separate Refuse customers. But only 40 of them today are operating in RNG. And so there's great upside as we begin to get more RNG supply and move it into our existing base. The same can be said for our transit. We operate and maintain transit properties across the country, but L.A. Metro and New York City Transit came to us and said, "Look, you've done a great job operating our stations. We also now want you to provide us with RNG and we've been able to do that." Finally, the industry hasn't been standing still, and we're really pleased with the announcement late last year by Cummins engine company where they're bringing what we've been waiting for, for quite some time is a new 15-liter engine that will be able to operate with RNG. The Cummins executives are very excited about this. They call this a game changer. They've never been as excited as they are right now about their natural gas engine program. This new engine will provide more horsepower and more torque, it really will make Cummins to have an entire portfolio of vehicles from 6.7 all the way up to 15 later that will be able to operate on RNG. And so it's very exciting. These engines are, again, 90% less NOx. So they're really great at the tailpipe and they're very low carbon. Now I'd like Bob to spend a moment and talk about our California opportunity because that's kind of 1 that's sort of a little bit of a secret unlike for you to fill everybody in on that Bob.

A secret, no longer. So look, we have talked about the opportunity in California and it really all gets -- it really kind of boils down to a couple of things. It's about the existing demand that is already in California of 125-plus million gallons and then using a strategy to replace that 125 million gallons, which is about 90% landfill gas with dairy. And I've kind of given an idea of the gross economics when you compare dairy RNG to landfill RNG of $13 a gallon compared to $4.20 a gallon. That $4.20 will go out to the rest of the non-California network as we bring in the dairy. And part of what's in our 5-year plan is the benefit of this incremental margin effect. And if on the -- the distribution side of the business, which is what is in our numbers today, that benefit would be approximately $70 million to us. Now when we provide the fuel ourselves, which is our intention, to bring in all of the dairy that we do to California. Well, that can contribute another $250 million. So the California opportunity with demand that we have in today, this is before we -- and of course, we're going to grow that demand. So we're going to chase it. We're going to chase the demand. But if nothing else, we'll get the dairy in there, and that's exciting. It's good for us. It's a good low carbon program, which we also see coming into other states.

It's not just we're going to talk about policy here in a second. It's not just a California story, it's -- we're seeing this happen across the country. Many states now are looking to, frankly, replicate what California has done with the low carbon fuel standard, and they call these clean fuel policies and look no further than New York. State of New York is very close to adopting the kind of something very similar to the low carbon fuel standard. And as you can see in this chart, there are many states that are in kind of various -- in the various stages of the policy their legislature looking to adopt a low-carbon fuel program. And so the way I see it is the market for low carbon fuels and RNG is expanding. It's not just a California story. And then at the federal level, as you know, we also participate in RINs and the EPAs recently at the very tail end of 2021 has come up with what we would consider to be very constructive in the renewable fuel standard program, the new RVO that is the obligations for parties going forward, we think is constructive for a robust RNG program. Okay. Bob, let's kind of begin to wrap this up and look at how this is all kind of fits together in the financial summary for what it means to Clean Energy.

Okay. Okay. Great. Yes. So here in the wrap-up, we're -- on the upper right there, we show our volume that's our total volume. So we've been talking earlier about our RNG volumes. This is where we see the growth of total volumes, which is an increase of -- at a 13% compounded annual growth rate on total volumes. While RNG supplied underneath that or within that is growing at 25%. So clearly, the RNG is a driver within the overall volume growth to Clean Energy. And then the RNG then also and with those fuel gallons increasing has a dramatic impact on our distribution margins because those are fuel gallons as well as then the RNG supply investment that we've talked about and its contribution. So you see what happens with the GAAP net income as well as our adjusted EBITDA. I mean our -- the adjusted EBITDA is increasing. And look, a lot of this is because of the timing and the development of the dairy and when these volumes come in. So you see that really ramping toward the latter part of the 5 years in terms of going from $65 million to $555 million of adjusted EBITDA. And I'll -- we'll take a look at that since that's a fairly dramatic increase. There's -- of course, we've got some minimal SG&A spend that will increase over this time. Certainly nowhere near a rate at which the volume and EBITDA is growing. And then contributing looking at our bridge here to the growth, we've got the trucking growth, which we talked about as a driver to this and our customer optimization, which there $90 million. And then really the California replacement, the RNG supply, the $70 million, the $250 million, that is essentially the California opportunity that we see as well as the growth opportunities for the -- even the rest of the country. So we feel that -- our financial plan, this 5-year model was, of course, put together prudently, but not necessarily reaching for the stars.

All right. Well, Bob, thanks. I hope this gave you an idea about how optimistic we are about RNG and what it really means to our customers and how it benefits Clean Energy's bottom line. I think it's very realistic and very doable. And now I'd like for you to kind of bear with us for the next minute or so as we set up the question-and-answer session. Thank you. [Break]

Thank you for standing by, and welcome to the Clean Energy's RNG Day Conference Call. [Operator Instructions] I would now like hand the conference over to your speaker for today, Mr. Andrew Littlefair. You may begin.

Thank you, operator, and thank you, everyone, for joining us in this question-and-answer session. I appreciate your patience. There's a lot of people on the line. So Thank you. So right now, I'm joined by Bob, Bob Vreeland, our Chief Financial Officer; and Will Flanagan, who is our Director of Operations. And really, I think of them as our upstream operative on the renewables. So why don't we dive in and take your questions.

[Operator Instructions] Your first question comes from the line of Manav Gupta.

First of all, congrats guys. This is extremely helpful. I think every...

Manav?

Manav, we're not hearing you, operator. We heard that it was extremely helpful, and that's where we dropped off.

Okay. I do apologize Manav is back online.

Okay.

Guys, can you hear me this time?

Yes, we can. Go ahead, Manav.

So I just want to say, look, this is exactly what we were hoping for. So thank you for providing this. A few quick things here. Looking at the dairy farm RNG volume growth, looks pretty strong, 105 million gallons by 2026. On the upstream EBITDA, [ $2.50 ] on a 105 million-gallon -- that looks a touch light. Are you basically being conservative here? Is there some upside to it? And what I'm trying to ask is here also, are you factoring in slightly lower LCFS price decrease, RIN price is all that going into making up that EBITDA guidance, what I'm trying to get to is, is there a buffer built in there and the actual numbers eventually could even turn up higher when you start producing these volumes?

Yes. Good question, Manav. And I'll say the short answer is yes to that. So what you have going on there is there is -- when we've talked in the past, LCFS particularly were a bit higher. So you have some of that going on. You also have just the dynamic of how a ramp-up in the build-out ahead of when the volumes come on at farms. So that is not all projects kind of at 100% firing on all cylinders, okay? So there's some ramp-up there. Now that will continue but I think as we add investment, it is going to go up. And then at some point, you'll get enough projects really kind of online to where you'll see more normalized economics per gallon. So it's really a little low just from the dynamics of how a modeling of starting up that business goes.

Perfect. So there is definitely upside on a per gallon basis. That's what ...

We would see that on a normalized basis being somewhere north of, say, $3 and maybe $3.50 kind of in that range, okay? Absolutely.

Perfect. $3 puts it over 300. That's what I was hoping for. My second question is Slide 38. This Cummins Engine, help us a little bit to understand why is it a game changer, where it has been introduced. What's the response to be -- it's being introduced in regions where it has succeeded what's the preorder booking looking for like for this engine at this point of time?

Okay. Well, there's some of that, that I can't help you with Manav. But it's a game changer because the 15-liter is the engine of choice for the over-the-road fleet. So you have to check with Cummins, but I think I'm accurate in saying that 15 liters today represents somewhere between 75% and 80% market share. Well, we don't have a 15-liter. So we have the 11.9. So this is the engine with the torque and horsepower that our customers want, get them over any terrain. This engine has been introduced overseas. It's coming here to America. It will be built in the engine plant in upstate New York. It's going to actually be lighter, more torque, more horsepower. It should be plenty more fuel efficient than what we have today. So it's really the next generation. It's really ground up engine, but we're not -- they're not going back to the lab. This is just an improvement over some engines that have been already introduced in, I believe, in Europe and in China. And so we're very excited about it and our customers are excited about. Now in terms of orders, you can't get this engine yet, all right? So it's not here for about 1.5 years or so. But the Cummins, as I understand, it has reached out to some of our largest customers, and they're all interested in being part of the test. And so we're seeing lots of excitement about it and Cummins is excited about it. So -- for the growth of this industry, this is the right engine at the right time.

Perfect. And last question, sir, is Slide 21. I think we have had this discussion, but looks like you're indicating that the total JV could be upsized all the way to $400 million equity. So is it already upsized, -- is it a potential announcement? How should we view that Slide #21.

Manav, I don't have it in front of me, but you're talking about the -- when we originally announced the -- and in fact, this came from the top of Total, as CEO of Total, I was hoping that we would -- he was actually pushing us, right? He saw the importance. This is Patrick Pouyanné, the CEO of Total. He saw the importance of RNG. No, they do some of this in Europe already, very excited about it. And he hoped that we would blow through the $400 million. And so it was really a challenge to us when we originally announced it. And I think what you're seeing today on that slide is we're already bumping up against our pipelines already calling for it to be upsized to the $400 million. So it's my expectation as we go forward, and we made that comment this morning that, look, we've just been at this on the supply side for 9 months. And Will and his team and some others that aren't with us here this morning, Tyler and Sean Wine. By the way, we've had some COVID, and I wish they were here with you today, Will. But thanks for hanging in there with us.

Last man standing.

Yes, last man standing, but we've just gotten started. And so I think both of these joint ventures will be upsized again and again, this is after 9 months. And so there are many few hundred farms to go here in the marketplace, and so we're just getting rolling. So yes, I think, Manav, it's a good point. I'm not making an announcement today that we've upsized it, but we have said that, that JV could go to $400 million. And I've also said this morning, we have that we see a pipeline that's already calling on that money. So I think it's probably safe to say that it's looking like that's where we're headed.

Your next question comes from Eric Stine.

The infill lot to digest. Maybe first 1 for me. Just obviously, the milling camp project, 5 million gallons. On the high end, I mean I'd love to hear what you're seeing in terms of project size. I mean I would assume that's not a size we should assume for most of your projects. But just curious maybe what the average size of a project is and how you see that trending over time?

Sure. Now we've got an expert here who's been out of all these dairies. And let me just make a general comment. This is 1 of the largest dairies in the United States. And so it's big and it's 5 million, and we were talking about the other day, there's a chance to go over 5 million a little bit, and that dairy will grow as well. But why don't you go ahead and you've been all over the country looking at dairies. Will, why don't you go ahead and tell Eric kind of what you're seeing and sort of how to think about it?

Sure. Thanks, Andrew. Thanks, Eric. It is Millenkamp is 1 of the largest carriers in America, and that's not indicative, but we certainly will look for those sized partners. We typically look for dairies that are in the 5,000 to 10,000 cow milking range. You can get -- you can go smaller, more in the 3,000 range. But there's probably 200 dairies in that 5,000 to 10,000 cow range that are really great for an energy project. They're sophisticated partners. They understand this as a diversity of their revenue stream. They see the benefits we get from the manure management. So we're looking for those type of projects -- and those would be anywhere in the $30 million to $40 million type of capital commitment and produce more in the 1 million to 1.5 million gallons.

Annually.

Annually, yes.

Right, annually. Okay.

Eric, I think -- look, there are 30,000 dairies in the United States. And so the low-hanging fruit are the few hundred that have the most cows right now, right? And -- but I think there's some economies of scale here. We're in early days and I think you're beginning to see we're learning some things as well as we go. I think you'll begin to see some efficiencies in the construction and in some of the equipment. And I'm guessing over time, what you'll see is you'll have some construction efficiency. And you'll begin to increase the number of dairies that come into the range that we would kind of today consider to be low hanging fruit. So it will begin to drop down. Obviously, we're going to start with those dairies that are the largest and then we'll -- it will begin to creep down from there. And -- in fact, some of our early dairies are smaller than the right?

Yes, absolutely. So what we've been able to do and with some of our partners is if you use a cluster model, you can get into some of the smaller dairies. I mean there's 32,000 dairies in America -- and I think every 1 of them has thought about a digester in the current market. So we have partners who are doing a cluster model and we're looking to find technology solutions, say, like a covered lagoon versus the tank digester that can make sense for a smaller dairy.

Eric, 1 other thing, not to be a drag on too long here. There will be some dairies that will be small enough that really don't fit the pipeline model, right, that where you'll clean up the gas and it will go into a pipeline. Some of them will just end up using the manure and making electricity and so it fits that -- as I talked about here a few minutes ago, it will fit that RNG pathway that goes into an electric vehicle. And that's why we made that investment with VTR Energy. And so I think a lot of dairies we'll get to participate in this, but just in various fashions.

Got it. Well, so maybe just thinking about the 2 initial tranches, the 1 with BP and Total and maybe my math is off a little bit, but just trying to ballpark I mean it would seem that using debt that would support between 20 and 25 projects, I mean if I use the 1.5 million gallons per year, I mean, clearly, that doesn't get close to your 105. So -- and maybe this is a follow-up to the previous questions. But I mean we should assume that those joint ventures are going to expand pretty substantially in terms of investment to get to that 105 million that you're targeting?

Yes. Go ahead Bob and explain of it.

Yes, the 105, you're looking at slightly over a couple of billion dollars of investment there. I mean, the 50 million that we kind of have even closer line of sight on is 1 billion. And so getting up to that $105 million, you're at about 2.4 -- I want to say 2.4 billion. And we'll have some debt or borrowing to -- for our contribution. But -- but nothing -- but it all kind of works out as these projects cash flow, the financing becomes pretty doable on all that.

Yes. No, absolutely. Makes sense. All right. Maybe just 1 more and then I'll jump back give others a question or other time for questions, but I think it would be helpful you've got the current model where you've got people supplying you goes through your station, you get a smaller percentage now that you move upstream, you're going to get a much larger percentage. I mean maybe any specifics that can help people understand what the difference is. I mean, clearly, it's a big difference given the numbers that you're breaking out, but just maybe what it looks like on a project level?

It's never enough, Eric, it's never enough. Well, I think we show there, don't we, Bob, a little bit the contribution from ...

Yes. I mean it goes -- the quick math on that albeit I think we just discussed that there's some upside is you're at $2.50 a gallon kind of net our share net to us from the RNG supply and that's not contemplating what we've already made on the distribution side. So our share when we're producing the gas is quite significant. It's

Maybe another way. It's just the -- so your percentage when it's just the credits, where you're getting what we see today, that small percentage. I mean, it's a fraction of that.

Right. I mean you're kind of in the distribution side has shared in 20% of the pie. And the RNG supply shares in 80% -- and with EBITDAs that are on a gallon basis or in the 50%, 60% at the farm.

Your next question comes from the line of Matthew Blair.

Good morning, everybody, and thanks for hosting this call. It's been really helpful. I guess just on the $555 million EBITDA target for 2026. Could you just review the underlying credit assumptions. Did you say LCFS $165, RIN $2.85 embedded in that number -- and I guess, current pricing is a little bit different, right? Current pricing is about $150 LCFS and $340 on the D3 RIN. So do you know what that $555 would look like at current pricing?

At current pricing, well, I can tell you what's in the $555 million on the LCFS is an average of about [ $2.85 ] -- and I know $1.85, sorry, $1.85. I know that, today, that is about $1.50 -- and we've planned in '22, $1.65. But I think we see the curve moving on the LCFS, similar to others that are participating in that, moving back up, but clearly, we're not going back up over 200. So our numbers at about 1.85 in there. And on the RIN, we're at $2.85. And we feel there's over the over a 5-year period that that's a prudent curve. And look, we've looked at curves, and we've -- we've spoken to various outside parties on that, that we use as our advisers, and we feel good about the 2.85, I mean we like where the RINs are right now. So -- but that's kind of where we're at.

Okay. And then on the upstream side. So there's been reports of just a ton of competition on the dairy RNG space you've signed up 20 dairies. Could you talk about what attributes you're bringing to the table that helping you win these deals? And then also, is there any pressure on the economics? For example, is the royalty staying at 20%? Or is that starting to creep a little bit higher? Any pressure on the economics as a result of all this competition?

Sure. All right. No, Matthew, those are good questions. Will, why don't you go ahead and talk about kind of what differentiates us versus some of our ...

Yes, thanks for the great question. We are seeing increased competition. But ultimately, we think what differentiates us is, first, the access to the demand and the Clean Energy is a long-term kind of partner and operator. There's a lot of people looking at this space, it makes sense, but there's not many that have really built projects or participate in the RNG value chain. So our kind of offering to the fleet to developers is that and offering to the farm is that farm to fleet connection. We take out the middle, and we're building long-term 20, 25-year partnerships just like we did on the fleet side. And so people appreciate that kind of match and clean energy is kind of core as an operating partner that works for them. You have seen a little bit of pressure as people bid up some of the royalties. But I also think the farm partners that we've worked with are discerning. They appreciate when there's just a financial player coming in and throwing dollars at them with no ability to deliver, and we think our offering with our partners in Total and BP, our ability to access the demand is really differentiated. And I think we've been successful so far in bringing those farms into the fold in a short time and expect to continue to do that.

Matthew our percentage is good, right at that percentage here and what we're winning is pretty good. And I really think it's because they see -- we've been at the business a long time. We've built a lot of stations. We understand the demand side. The code for demand side is we work with all the customers, right? We're not a broker. We're not trying to flip dairy and make a quick buck. We -- our customers, it's the Amazons, it's the UPS, it's the Republic's waste management, it's other very large fleets. They want this fuel and we want to sell it to them. So that rings when you're talking to a dairy that, by the way, are in first, second or third-generation dairyman, what we offer, I think, is very compelling to them. It's a long-term look at hooked up to the demand side of the equation.

Sounds good. And then just one last question on the downstream side. The 70 million California opportunity seems pretty significant. I just want to make sure I understood exactly what you're saying there. So you're saying that as you bring more dairy RNG volumes in that California system that your downstream fueling margins will move up because you'll be capturing a higher share of that margin that elevated margin is that the right way...

Well, yes, let me hit the big point and then -- and Bob take you through kind of the math of it. So think about it this way. It's a little bit different than the old days when I would say, okay, I'm going to build a station. Well, let me go out and look for the demand. Let me go out to convince the fleet. In this case, we have 120 million gallons flowing through our stations in California today. That is all RNG, right? Most of it, 90% of it is landfill RNG. So job 1 is the way I think about it is we got to get that lower CI, right, more valuable fuel we begin to put it into our California infrastructure and move the landfill gas out. And it's an immediate -- it's like magic. It's an immediate upgrade of our margin per gallon. So Bob, why don't you go ahead and talk about how the 70 million versus kind of even more than that when you think about it.

Yes. I mean -- so going back, our distribution side of the business, is sharing in kind of 20% of the economics and then we've got a marketing arrangement with BP, and so there's some sharing there. But in effect, the margin uplift there is the fact that the dairy gas generates almost 10x the credits. And so I think we showed the gross value math on our schedule there and really doing the math on that, you'll see that what is 70 million to the difference between 13 and 4.20 and we end up enjoying about 6% to 8% of what that uplift is, but on 125 million gallons you're looking at just an overnight uplift of 70 million.

And if I can add something to that, the other important thing is that 70 million of net of sharing some of that benefit with our customers. As we go and increase that whole value chain, we're able to share that with California fleets that comes out of that 20% as well. That helps keep our fleet customers happy and drive growth in that California market beyond it.

Your next question comes from the line of Rob Brown.

Congratulations, and thank you for all the good detail here. My question is about time to kind of build these facilities when the CapEx goes in and how you sort of see the cash flows coming back out and how the timeline works here?

Sure. I'm going throw it to Will, you're working on it. Go ahead.

Thanks, Rob. So we -- it takes somewhere between 12 to 18 months from kind of initial conversations on the development side through construction. We can certainly shrink that. We're working with a farm that either came to us with a little bit of that work done or if it's something in the upper Midwest, you lose the winter, but in Texas, you get to build 12 months a year. So we think we can get it as close as 12 months to build that. Once you reach commercial operation, it takes about a year to get to full revenue. So you'll start getting rent in RIN and gas revenue, which will cover our operations but you don't hit full revenue until about 13 months after commercial operation. So kind of from breaking ground to when that really hits our financial statements is about 2 years.

Okay. Good. And then maybe just in terms of some of the financial pieces. Do you sort of have a rule of thumb in terms of the kind of CapEx per gallon that you get and sort of how the cash flow works that you're willing to...

Sure. So I think we see the CapEx per gallon somewhere between $20 and $25 as a rule of thumb. It does really vary regionally depending on what we're working with, how long the access to the pipeline is. But I think you get -- roughly, we're targeting that $20 to $25 per gallon CapEx ratio as...

You see it ought to be closer to 20%. I have to watch these guys all the time. But it really depends on the -- the big variable there, Rob, is the pipeline. And right, because you get if you're just -- if you're 8 miles away from the pipeline, that's what drives up the cost. That's the big -- would you say, Will, that's the big change takes it from $20 a gallon to something but higher.

Absolutely. And the other one is the technology. When you're using a covered lagoon more in the California type market, that can have a little bit lower production but also much lower CapEx. And then when you get into the kind of heated tank digester type applications, those can be higher as well.

Okay. And then back to the discussion about California, the switching out of the RNG to dairy. I think in your presentation, you said that, that $70 million number had ways of that increase as well. And maybe I missed it, but what sort of levers can you pull to get that number higher as you switch in more dairy?

Yes. Rob, I think that is really as demand grows, that we're going to -- that number will go up. I mean our simple replacement of the 100-or-so million gallons drives the $70 million. But frankly, we're going to be chasing demand and demand will increase, which will drive that number up, our distribution side of the business, we'll then continue to enjoy the economics that are associated with dairy.

Your next question comes from the line of Craig Shere.

Thanks for all the details. So first, I -- can you hear me?

Yes. I hear a little background music.

Yes, I do, too.

Groovy though. All right, go ahead, let's try to work through and maybe someone will figure that out here in a minute. There you go.

So first, given the comments that it can take 2 years for projects to reach full cash flow with the LCFS opportunities. One -- it sounds like there's a good couple of years of healthy EBITDA growth built into your guided CapEx, if you do nothing else, even beyond 2025, 2026 because all your projects aren't going to be fully cash flowing. Can you speak to the inevitable upstream kind of follow-on and how much ongoing growth we have from what's already on the ground.

Sure. Thanks. I think that's exactly what we've tried to show in the 5-year outlook. In just a year, we have just under $400 million of capital committed and under construction, and we plan to keep that growing through 5 years. So I'll let Bob talk about sort of the financial element of it, but you're totally right. We don't see this stopping. We think there's a demand for this and successful -- but get success, and we will continue to make investments in 2026 that will have a full revenue tail kind of outside of the financial projections today.

Yes, yes. Yes, I mean, the 105 million gallons that we see in '26, then really is on a path toward 150 million gallons. And then to the point we made earlier, then we should start to see the overall blended economics move toward what a project can make when you look at it stand-alone and it's fully earning at that kind of $3 a gallon EBITDA. And so -- and that's -- you can do the math on that. And then you'll see this is where the upside of that goes.

The other thing, Craig, and not to get too far afield here is -- I like to think of the model as it's -- there's obviously growth embedded in it. There's a lot of capital and investment in it. And obviously, we need to have the RIN and LCFS to hang in, and we don't have to have it fly up. We just need to have a good prices throughout the term. But we haven't done anything fancy in the model to suggest -- we don't half a million of trucks or anything crazy in the demand side. I mean remember, as we talked through this morning, this is not all just about RNG. It's also about our distribution business, right, our underlying business. And that business is beginning to pick up as well to sort of the Amazon effect is happening and fleets are looking at what they need to do for their sustainability. And RNG is one of the lowest carbon solutions that you have on the planet. And so as fleets begin to look at, okay, people are on my back to reduce our carbon. Do I do RNG? Do I do electric or do I do fuel cells? We have the right answer today. And so I think you'll have on the demand side of the equation, the customer side, there's more growth that we have frankly, stop most of the significant growth in that model about end of 2023. We have some trucking growth, very little. About 1% of the Class 8 purchases is in this model, so that you're talking about a couple of thousand trucks in those out years. So it's very small. We just didn't want to have a cliff. And so I think you're going to see our -- the distribution and demand side of this model grow and we're being conservative for what you're seeing right now. So I think there's some real upside in this.

Well, just to kind of put the numbers on what I -- and I think there's a lot of conservativeness across the board here. But you said it was $3 to $3.50 over time at maturity with projects and EBITDA margin per gallon and 105 million gallons that's $3.15, but you're guiding to $2.53 of the EBITDA in 2026. So on what's already invested, there's another $60 million of EBITDA over time, plus. Am I saying that right?

Yes. Yes, they did over time. I mean as we look into '27, '28, '29, absolutely. And these are long-term investments, these projects, of course. And so it builds over time, but we're going to get to a good scale.

Right. The point being, you have that additional upside without even putting in more money in new projects. That's just huge.

Yes. I mean. Right. And that's kind of the tricky part to stopping a long-lived growth asset investment stopping it in time, which is what we've done. But we've just -- we've accurately reflected where we will be as of 2026 and trying to communicate here. So thanks for making the point even further, that it doesn't stop at '26. It continues to go on to reach really more full potential.

Great. And my follow-up, I just want to understand the capital funding. So it looks like there's $405 million of guided CapEx from '22 to '26. So I want to hear how comfortable you are about your ability to fund that without resorting to equity issuance or at what time how far out equity issuance might be needed. And then on the guided $1.36 billion of total JV upstream investment, assuming 80% debt and half the equity on your count, that's only $136 million over 1/3 of that seems already funded off your balance sheet. So am I correct in saying that there's not a lot of additional equity you need to put in to meet that through 2026?

Okay. The answer to that question is yes. I don't know that I followed all the math that you just put out there. I was following it pretty much. But I mean the underlying question here is we are comfortable that these projects are ripe for project finance and our target is to raise debt that is directly attributed to the cash flows of the projects.

And I assume that as we get out 3, 4-plus years that a lot of this from the JVs can self-fund. So while you may not be getting cash flow distributions every year out of the JV. They just keep self-funding in a virtuous cycle.

Yes. Yes. That's the plan.

And then in terms of funding the CapEx more on your balance sheet, I'm assuming that's more for the downstream. What are your thoughts as far as your balance sheet to support that and when and if you may ever need more equity issuance?

Well, the CapEx on our balance sheet, at least what we've I mean we can handle that with operating cash flow. And we have -- we do have through our facility with Societe Generale, we have some specific financing opportunity if we so choose related to our Amazon station build-out. And those -- the Amazon station build-out amounts are embedded in these CapEx numbers. So -- but principally, with the EBITDA and the cash flow we're showing, we can self on that. We're not in any big need to raise debt for that.

Great. And my last question, I know that you had gone back to some share buybacks. Obviously, the shares have gotten to an absurd value level of late. You're -- given that you're comfortably self-funding your thoughts on the ability to continue share buybacks over the next year or 2, if these remarkably depressed valuations are sustained to any degree.

Right. Well, Craig, we felt the same way and our Board felt the same way. They authorized to increase share buyback, as you know, which we've announced, and we've participated -- we've done some of that over here in this time. We thought that the stock was a good value at this rate. And we've -- but we've been careful, right, we've got a lot of designs on our capital, but we also thought if the stock was taken it on the channel a little bit and felt like it was a good value. So we've been in the market.

Your next question comes from Pavel Molchanov.

Going back to one of the earlier questions, you clarified the underlying assumptions for RINs and California LCFS credits. What is the assumption and the math for the AFTC bearing in mind, of course, that as of January 1, it's expired.

Right. In our model, Pavel, we've got it in there. We've got -- we've had the AFTC now over the last 10 years or so. And you're exactly right, it's expired. It looks to us like the most recent discussions back in Washington is that actually the AFT and some other things like it is not the only thing. We're kind of the in agreement, noncontroversial tax titles that were in the piece of legislation that, as you know, is not currently moving. And so we've gone ahead and put the AFTC in this model. So you should think of it as about 20 -- in the outer years, it's more like 25 million. So that's in there. And because -- and the reason we have it in for the 5 years is because the current legislation that, as I say, was kind of a non-controversial tax title in the most recent legislation. It was a 5-year extension. So we've got it in there as a 5-year extension. And I like our odds. I think what you're going to see in Washington is you're going to begin to see pieces of the bill back better and others, you're going to begin to see titles take shape, and you'll see some funding and tax titles, legislation throughout the year. And I think the FTC will be one of those. So it's in that model.

Okay. And you're assuming the extension will be retroactive?

For this...

'22.

It doesn't have to be I mean retroactive for this year, right. Right Yes. It will be '22 and then forward.

So if it comes on, if it gets passed and the third quarter, as an example, it would -- we'd end up picking up 3 quarters.

It always has been. So I would think so.

Maybe just a broader question. You're obviously very excited about RNG and have been for years. Is there still a future for conventional natural gas in the fuel market in this country?

Well, it -- the RNG has an advantage right now because of the low carbon nature of it. Now I -- look, I've cut my teeth in the business -- in the oil and gas business many years ago. I think it would be probably wrong for the next -- there's a lot of oil and gas in the world, and I think it would probably be wrong to assume that, that industry and those reserves are going to be forever impaired and just shut in, I think there will be lots of things to work on capturing methane and improving the carbon profile of those fuels. That's just my personal opinion. And so right, today, fossil, fossil fuels, fossil natural gas is not as advantageous as RNG in terms of its carbon -- reduction in carbon. It just isn't. Around the world, I think there will be a lot of natural gas used in transportation as people look. And I think that natural gas will probably get cleaner and have less carbon in the future. I mean we've got a long way to go here in the green transition. And I think we don't -- none of us really know exactly how this is going to take shape. What we do know is today, RNG has provided a huge opportunity for transportation and especially heavy duty when you compare it to the other technologies. It's just cheaper. It's dramatically cleaner and it's here today. And it's in a pipeline system that's already been developed without having put in a new system. So that's why I'm pretty bullish on it. But I think a lot of natural gas will be used probably less so here in the United States than in other parts of the world, but it will be used in transportation, Yes, I do.

And Andrew. Yes. I just -- I want to -- and Pavel, I always like to put in the kind of the effect of the near 0 natural gas engine that if you're running fossil natural gas, you're still getting 90% lower NOx. And that's pretty clean. I mean, if you just start there with a 90% lower NOx, that is doing some significant work. Now of course, when you add in RNG, that's when you start to go negative.

Well, and Bob, on that point, and I think Pavel knows this, is moving from diesel fuel to fossil natural gas, you get about 25% reduction of carbon. So I mean, it's not the end all and it certainly is an RNG, which is negative minus 250, but you do get an improvement. So in parts of the world where we need to make an improvement, you get a 25% reduction. So it's not a total waste of time, right, exactly.

Yes.

Your next question comes from the line of Jason Gabelman.

Thanks for all the information. I appreciate it. A few for me. First, can you discuss the percent of upstream RNG and downstream RNG that's going to be sold into states that have an LCFS based on the numbers, it doesn't look like you're assuming 100%. So maybe just assuming how that -- those percentages change over time.

I'm not exactly sure. The question, I mean, go ahead.

[indiscernible]

Well, I mean -- Well, look, there isn't a low carbon fuel standard in any of these other states, other than Washington, Oregon and British Columbia. So I don't know that our model breaks out, okay, how much of our fuel goes into New York and when do we upgrade the New York to the because I don't even know what their -- the exact feel is for their low carbon fuel standard. But over time, I think what it is I think about this, well, you're smarter than I am. You will upgrade, right, the low carbon fuel standard as it becomes active in these other states, you'll upgrade your margins.

Yes, absolutely.

But right now, it's really predominantly in this model, it's predominantly a California exercise because -- or West Coast exercise, not -- we don't have it weighted over years in these other states because those haven't been past yet.

I mean we'll -- I guess -- I mean, we are -- we always will optimize to the LCFS or a low-carbon fuel policy state, okay? So I don't -- I think our model wasn't -- or the mapping wasn't necessarily to try to do that optimization without knowing specifically what states. But I mean the beauty of having stations all over the country is it allows us the opportunity to direct the gas to the highest monetized value to us.

And Bob, I think we have about 55% of the 475 million gallons that would be in an LCFS program, primarily in California, everything else nationally would be upside to the way we typically think about the economics.

As they go.

Great information about that program and we're...

It's a good point.

And we've not right. We've not -- I mean, that's not baked into our model in anticipation of greater economics as a result of that, not yet.

Yes. Maybe I could try to clarify the question a bit. Sorry if it was confusing. So you have -- you're showing you're going to produce 105 million gallons of RNG by 2026. Are you assuming all of those volumes are going to be sold into states with LCFS programs? Or do some of those get sold in the states where you don't have LCFS programs, so you don't get that credit. And then same question on the downstream. You have volumes of R&D growing from 1.94 to 3.69. Are you assuming all of that R&D gets sold into states with LCFS programs?

Well, certainly, our -- what we're producing, the 105 million will go into LCFS. And again, we'll -- I mean, the process is the highest value gas goes to the LCFS state, so -- and what we produce. So looking at the math. This is why I said a lion's share of the EBITDA economics for the R&D supply is right off the bat, chasing California demand.

But to answer your question, 105 million, right? It's 105 million of it is into California with we're enjoying the low carbon fuel standard and the others, not, right? It's outside. It's landfill gas, which is not enjoying in this model at this time, low carbon fuel standard because the other states haven't adopted it yet, right? So that's upside. Right, Jason.

And we see today, right, we have 120 million gallons of demand in California it will take us to about 2026 to own enough production to get through that. But I don't think the California demand stops at 120 million. We have major programs like with Chevron that will continue to drive that demand. and we're buying third-party gas from both dairy producers as well as landfills and we'll follow what Bob was land out from an optimization. We'll get the dairy into California as it grows from 120 million up and then the landfill will go nationally and there'll be upside to all those LCFS programs.

Got it. Okay. That's helpful. Turning to the downstream. You've discussed having this strategic moat in this business and that enabling you to capture more of the projects on the upstream side. When you think about that strategic moat going forward, do you see increasing competition from other players that would look to build out the downstream natural gas distribution system? Or is this something that it really seems like in the next few years, there's not going to be a major strategic competitor that emerges?

Well, I think over time, if we're right, you will see more competition. on the downstream, right? Because as customers want to avail themselves to RNG, there are other field providers in the business. And so I would like to think you probably would see some competition. Now we're pretty far ahead of them. I've seen where Chevron is talking about by 20 -- I don't know, '25 or 2030 having 30 stations. Well, we have 550 stations, all right. So we're pretty far ahead of the crowd. We've been at this a long time, but I think you'll have more competition. I hope you do. That means it's working. And it will take time for others to move forward. There was a point 4, 5 years ago, we had 100 competitors. 100 people have announced plans to build natural gas fueling stations, right? And a lot of those went by the wayside. Now our competition is something you could probably count on one hand. But I think as people begin to really understand this RNG and the natural gas into the over-the-road trucking market with RNG, you'll see more stations built.

Got it. And then lastly, I just want to touch on the LCFS in California, there's scoping meetings going on right now. And there is some discussion about California removing I guess, dairy-based RNG and RNG altogether from the LCFS program, it seems like those discussions are in early stages, and it's unclear if that has a real chance of -- if RNG has a chance of being taken out of the LCFS program. Can you just discuss your involvement in your discussions and your views if there's any risk of that?

Sure. I think we're certainly aware of those discussions on the scoping and some of the 1383 regulations. But our view is that it won't be taken out of the program because the LCFS program is working for California. The first thing that they're looking at is whether or not there is voluntary compliance and the dairy farm partners in California through these energy projects are complying with exactly that sort of methane capture type regulation that I think people bring up there. So -- and then going beyond that, our view is that California has a program that's working that's a national leader. And if anything, there is likely to want to extend the carbon reduction targets and look at this and say, what's working, right? There's a market system that's technology neutral. And let's increase the target to go beyond 20% in 2030 and see where we go next. And so we'll be a part of those conversations. We'll be active making sure that this industry has represented and also that the California dairy farms are part of that because I don't think [indiscernible] is trying to regulate them in a way and makes it tough for them to operate. They have a working program that's technology neutral and successful so far. So our view is they'll continue to do that. And if anything, extend their climate leadership going forward.

I agree.

Your next question comes from the line of Greg Wasikowski.

I'll echo what everybody else has been saying, is a pretty helpful event and pretty well done. So thanks.

Good. Good.

I'll start with upstream in the JVs and just thinking about upsizing, you've spoken to upsizing both the JVs. We have the $400 million kind of cap on Total, but you mentioned that you could easily blow right through that. Haven't really talked to any sort of bound on the BP side of things. And I'm just looking at the pipeline, BP pipeline being bigger than Total, is that indicative in any way of the upsizing ability on the BP JV side of things versus total or is that just simply a function of timing?

It's a little bit of a function of timing. We have been working -- you'll recall that we had an ongoing marketing arrangement with BP. We sold them. I know we're newer again in the supply game. But we were here once before on RNG, and we sold our upstream and our supplier relations to BP, and then we entered into a marketing arrangement. So we've worked very closely hand in glove with BP for the last -- since 2017. And so I think we just got a little -- because of that, relationship, we just kick-started that JV a little faster. And the particular dairies and developers that were involved with BP and us just they had clusters. And so we've just got to got going faster. I would say, though -- this is general, and then I'll turn it to Will, who works very closely with our BP friends. I would say that actually, when you look at Total, BP and Chevron for that matter, I've been in talk to all of them. I've been in Paris and in London to senior executives. You know what? As they -- as these major international companies look at how they need to decarbonize and I do believe that they all sort of hear it and get it, this R&G opportunity makes a lot of sense to them. And they all believe in it, and they all think it can contribute. For instance, if -- and I think I'm right on my numbers or at least close enough. I believe that Chevron produces about 1 billion gallons of diesel annually in California at the refineries. You know what? You could offset that diesel in terms of carbon with a couple of hundred million gallons of RNG. And so this is real. And so these energy companies understand this. That's why they're all in the game. They're all being active. They've all made announcements. That's why I think Total has been very interested in what they can do here. They're already doing it in Europe and same with our friends at BP. There is a great appetite. These are attractive and they understand it, use the pipeline systems that energy companies understand. And so I think you'll see a lot more money go into it because it's something that's real and can make a significant near-term contribution to decarbonization, and that's what they need to do. But you talk to them and work with them.

Absolutely, Andrew. I think we -- being careful not to speak for their capital allocation, it's a big part of their capital strategy and so we try to land today was the way we see this going. Both Total and BP are committed partners and with them, we're kind of -- these joint ventures, we're intending to build a business that has a team ready to deliver on the strategy and part of what we know from our conversations with them is they're planning to do the same thing. So careful not to say that they've made any commitments other than what we've already announced. We think there will be a long-term funding and operating partner for us, and it will be really powerful. And I echo what Andrew said, all of them are talking about RNG dedicating resources to it, and we really enjoy kind of the collective ability to attack the market.

Right. Okay. And then on Millenkamp, can you speak to the kind of the origins of that relationship? Did you guys have any context there? Did it stem from -- on the BP side of things? Or just the typical bidding process pretty straightforward.

I think that's a great one and sort of highlights the depth of our relationship with BP. I think I'm allowed to say the name of the developer, we worked with the developer partner there named SKS -- they had a long-time relationship with Bill Millenkamp. And so last year, BP brought that one to us as part of the joint venture. And so we were really excited to be a part of it. It's, I think, kind of a marquee project in the United States, one of the best dairy farms. Bill is an incredible businessmen and partner to us, and so we're able to work with BP and kind of move that one through pretty quickly, frankly, as it develops late in 2021.

Great. All right. And one more, if I could. Just on the hydrogen side of things. I know it's still early days for you guys. But can you speak to where pricing is shaking out either now as you put in your hydrogen reformers or at least model it out and where you think it could be versus some of the other methods of hydrogen generation like electrolysis and some of the other numbers that other hydrogen market participants are speaking to around $4 a kilogram or lower?

Yes. Now look, I'm not -- I'm a little bit of an expert because I've operated -- we've built some hydrogen fueling stations over the years, probably operated them about as long as anybody. We have a hydrogen fueling station at our early station that have had for 10 years. Look, we're responding today to RFPs with transit properties that are using federal money to build what I would consider test. So let's be clear what we're looking at. These are tests. This is a transit agency that has 200 or 300 buses that's going to test hydrogen fueling station with 20 buses, and it's going to cost $10 million and the fuel is $11 a kilogram. It's not $4. I know where the market wants to go. It's not there yet today. So I want to be clear is that I do see over the -- I'm in the camp of this is further out than many people think. I'm not afraid of it. I think that eventually, hydrogen and fuel cell technology is right technology. I'm not sure the heavy duty is the place that I will start, and I think the challenges on electric heavy-duty and the challenges of fuel cell heavy-duty there are many. And I have looked at a station for a very significant fleet customer to do 25 heavy-duty Class 8 fuel cell trucks, which you can't get yet, state is $23 million versus about $2 million, $1.5 million for RNG or natural gas. So there's a long way to go here. And in terms of reforming technology, I'm not an expert to know if it's going to be electrolysis or if it's going to be steam reformation. I think there are better people on that than me, but we will have an opportunity when this becomes more commercial to use the RNG. I do kind of think that that's going to sneak up on people, and it will be renewable natural gas, which is going to end up being the greenest and lowest carbon feedstock that will be reformed at the station or at a hydrogen plant, a regional plant. But there's a lot of work that still needs to be done there. But we're excited to be part of it, and we're excited about the foothill opportunity. There are about 5 other transit properties that are behind foothill right now, and we'll end up likely bidding on those. But we're bidding to construct something using federal transit dollars, and we'll learn a lot from that. But these are early test fleets.

This concludes the Q&A portion of the conference. I will now turn the conference back over to the moderator.

Well, thank you, operator, and thank you, everyone, for joining us. Thank you, Bob, and Will. I hope you found this RNG day informative. I hope you share maybe some of the optimism and excitement that we do as we look forward to this powerful low-carbon fuel, and I'm just glad that Clean Energy could be a part of it. All right. Thanks for joining us today. We'll talk to you next time.