NW Natural customers could be on the hook for $8.3 million after a failed investment in a renewable natural gas facility that’s set to close later this month. That’s if the Oregon Public Utility Commission approves the company’s request.
Late last month, NW Natural filed an application to defer costs and revenues from its Lexington Renewable Natural Gas Project, which is shutting down. The project was based at a beef processing facility located in Lexington, Nebraska, and is co-owned by Tyson Foods and NW Natural. The utility invested $8.3 million through an affiliate agreement approved by Oregon utility regulators. The Lexington project was producing renewable natural gas, or RNG, which is a type of biogas that can be made from decomposing organic matter.
FILE - NW Natural Gas crews in Portland in 2021.
Kristyna Wentz-Graff
Under state law, when utilities like NW Natural face unexpected expenses they can reduce their profits to pay the bill — or they can ask utility regulators for permission to shift costs to ratepayers. Spread across all the utility’s customers, the cost of the RNG project might add up to only a few dollars per year, but advocates still criticized the company and said NW Natural leaders could have seen this coming.
The Lexington RNG project was a part of NW Natural’s effort to offset its carbon emissions, which it is under growing pressure to do as Oregon works to reduce the burning of fossil fuels that contribute to human-caused climate change.
This push by state leaders and climate advocates to reduce the use of fossil fuels, including methane-based natural gas, creates a challenge for NW Natural. The company has long been reliant on fossil fuels for its business model. Whereas electric utilities can switch from generating power with fossil fuels to using renewable sources like wind and solar, there are few alternatives to the product NW Natural delivers to homes and businesses.
Renewable natural gas has been a key component of the company’s effort to navigate this pressure. RNG is often produced by capturing byproducts from landfills, livestock operations or wastewater treatment. It’s mostly made up of methane, a greenhouse gas that is 86 times more potent at trapping heat in the atmosphere than carbon dioxide over a 20-year period.
The partnership with Tyson Foods is one of five renewable natural gas projects NW Natural has invested in to comply with Oregon decarbonization laws. None of the companies are in Oregon.
In late November, Tyson Foods announced it would close its beef processing plant, and with it, would end the production of RNG.
Now, NW Natural is asking the Oregon Public Utility Commission, which regulates utilities, to allow it to recover $8.3 million through customer rate payments.
NW Natural’s senior communication manager Stefanie Week told OPB the company is currently assessing the value of the facility and it could potentially lower the amount it seeks to recover to less than $8.3 million.
“The Lexington RNG project is only one part of our RNG portfolio, making up a small fraction of our contracted RNG resources for 2025,” she said. “RNG procurement activities at NW Natural will continue, but with a cautious approach as the markets and regulatory environments are still developing.”
According to NW Natural’s application, the company “could have not foreseen Tyson ending operations at its Lexington beef facility when it developed the project.”
But the head of the Oregon Citizens’ Utility Board, a voter-created nonprofit advocacy group, said regulators and NW Natural could have seen this coming. Oregon CUB executive director Bob Jenks said his organization, along with others, warned the Public Utility Commission in 2022 about how risky investing in RNG was.
“There are real questions as to whether customers should pay for the remaining cost of this when we’re getting no value out of it,” Jenks said. “We’re not getting any RNG, we’re just subsidizing not Northwest Natural, but an affiliate of Northwest Natural.”
An alternative fuel
NW Natural, which serves about 2.5 million people in Oregon and Southwest Washington, has long touted the idea that renewable natural gas could replace traditional fossil fuels like oil and the gas it uses. The company has said it would procure this alternative fuel to meet state decarbonization goals.
It has fought against electrification, which involves moving away from gas and oil-fueled stoves, furnaces and cars to electric appliances and vehicles that can be powered by renewable energy. Instead, Northwest Natural has doubled down on investing in RNG.
That quest came after lawmakers passed Senate Bill 98 in 2019. The law created a program that set gradual voluntary targets for acquiring RNG. Its goal was to “encourage” a smooth transition to low-carbon fuels in Oregon. Ultimately, the law steps up a target for NW Natural’s customers to receive 30% of their gas in the form of RNG by 2050.
But NW Natural is far from that target. In fact, only 1.02% of the gas NW Natural sold to Oregon customers in 2024 was RNG. The company has repeatedly failed its own RNG targets, barely reaching 1% in four years.
Although the company told its customers in a November bill insert that 1.76% of its gas was RNG in the first three quarters of 2025, NW Natural is still a far cry from reaching the targets set by the law.
Week said the company expects 4% of the gas it sells to customers will be RNG in 2026, at a time when large natural gas utilities are being asked to procure up to 10% according to the state’s targets.
But NW Natural has also eliminated 2% of the jobs supporting this work, which has resulted in a smaller decarbonization department.
And the planned closure of the Lexington facility this month could impede the company’s already slow momentum as it seeks to procure more RNG.
“At the end of the day, the amount of RNG delivered to customers in Oregon from Oregon facilities is zero, right?” Green Energy Institute at Lewis and Clark Law School director and staff attorney Carra Sahler said. The RNG the company has obtained comes from other states. “And Northwest Natural is just absolutely doubling down on this message that it is delivering renewable energy when it’s not.”
Sahler said NW Natural’s investment in the Lexington Renewable Natural Gas Project was risky from the beginning, and she was concerned that it didn’t bring in any of the benefits that SB 98 sought for Oregonians.
Both Jenks and Sahler said using RNG for residential customers did not make sense, as they argue this type of fuel should be used for hard-to-decarbonize sectors, like alternative fuel for industries like trucking, aviation or ships. They would prefer homeowners to switch to electric heat pumps rather than RNG-powered gas furnaces, for example, a part of the push to electrify that creates challenges for NW Natural’s business model.
Though the cost NW Natural seeks to shift to its rate payers may not be significant now, Sahler said, it’s the aggregate of this and other impacts that will add up.
“This particular piece, if you were to divide it up among all of NW Natural’s customers, doesn’t look like a lot, but it’s wasted dollars, and it’s dollars that didn’t benefit us,” she said.
The Oregon Public Utility Commission may address NW Natural’s application in a public meeting this year, where it will determine whether to authorize the deferral, which would then allow NW Natural to request the cost recovery.
