Dairy farms are cashing in on methane from manure Big dairy farms are profiting from California's tougher limits on greenhouse emissions. They're getting paid to capture methane from cow manure. But critics say the system subsidizes polluters.

How dairy farmers are cashing in on California's push for cleaner fuel

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On a mission to cut greenhouse emissions, California pioneered a program that's now spreading to other states, and it's become a windfall for some big dairies. They're getting paid to capture a powerful greenhouse gas that's released from cow manure. But critics say these payments actually bankroll polluters. NPR's Dan Charles explains.

DAN CHARLES, BYLINE: High Plains Ponderosa Dairy in southwest Kansas has thousands of cows. The dairy's general manager, Greg Bethard, says they stay comfortable inside their barns.

GREG BETHARD: Where they're - got, you know, fans and cooling in the summertime, and they're warmer in the wintertime. But because of that, when our cows poop, it goes on the concrete, and we collect it all.

CHARLES: The manure goes into big storage ponds called lagoons, where bacteria feed on it and release a gas called methane. That's the main ingredient in the fuel we call natural gas. It's also an important greenhouse gas heating up the planet. But now High Plains Dairy is building big tanks for the manure, so-called digesters that will capture the methane, and they'll send it to a natural gas pipeline just a few miles away.

BETHARD: So our gas is going to be injected into the pipeline and make its way to California.

CHARLES: It has to get to California in order to be part of a lucrative transaction - methane cuts in Kansas cancelling out pollution in California - because California is imposing tough new limits on greenhouse gas emissions from the state's oil and gas companies, and one way those companies can meet the cap on emissions is by paying for cuts in greenhouse emissions somewhere else, like at High Plains Ponderosa Dairy.

BETHARD: It's just another source of income for us.

CHARLES: The way it works is California issues pollution-reduction credits to the dairy based on how much methane it captures, and then California's oil and gas companies can buy those credits to cancel out their emissions in the state. There's a somewhat different federal program that also awards credits. And together, those credits will likely be worth tens of millions of dollars a year to the dairy and a partner that's actually building the digester, although the price of those credits does go up and down depending on demand.

BETHARD: If you take today's value and extrapolated it out, yes, there's profits to be made, but I still think long term our primary income source is still going to be milk.

CHARLES: An economist at the University of California, Davis, Aaron Smith, decided to look into the economics of this last year.

AARON SMITH: I had heard people saying, well, this is kind of a big deal. And I sort of put off looking into it for a while 'cause I thought, how big of a deal, really, could it be?

CHARLES: But once he looked at the numbers, he was stunned. Revenue from the pollution-cutting credits amounted to a 50% boost over what a farm would earn just by selling milk. Smith says it's so much these credits might actually encourage dairies to expand - adding more cows, producing more manure. And remember; those cows also burp out a lot of methane as they digest grass, and that methane can't be captured. It all seems contrary to the goal of California's emission-trading system.

SMITH: If you have a program that creates incentives to generate more pollution, then you're not going to get the benefits that you want.

CHARLES: Smith says he's seen no evidence that these credits are persuading dairies to expand, but considering the numbers, he says, it certainly could happen. And some environmental justice groups are mobilizing to stop it. Brent Newell, an attorney with one of those groups, Public Justice, wrote a petition to California's air pollution regulator demanding that it stop giving dairy or beef or hog farms credits for capturing methane.

BRENT NEWELL: The solution is not to commodify it so that cows and hogs are pooping money.

CHARLES: Newell says these credits mainly benefit the biggest polluters, the biggest farms and those that store manure in lagoons.

NEWELL: And it harms the health and welfare of communities that experience all the air and water pollution that's associated with the factory farm system.

CHARLES: California's regulators recently denied Newell's petition, though. They say the current system is working, encouraging farmers to capture methane. But they promise to study the criticisms and decide whether the program needs tweaking.

Dan Charles, NPR News.


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