Joey Airoso last year hooked his dairy into a huge California renewable energy project, a network of farms that turns the gas leaking off manure from 35,000 cows into a biofuel.

It wasn’t cheap. The total project cost more than $30 million, but a grant from the state’s cap-and-trade program that’s meant to help dairies slash greenhouse gas emissions and comply with a global warming law made Airoso’s decision an easier call.

“None of this stuff is free. It’s important to support the dairy farmers who are trying to be sustainable,” the Tulare County dairyman said.

So far, California has steered at least $260 million in those grants to methane digester projects like the one Airoso joined. The California Air Resources Board projects they’ll remove millions of tons of greenhouse gas emissions from the atmosphere, and Gov. Gavin Newsom is asking lawmakers to put another $35 million into the dairy grants.

But this year, the subsidies are meeting new opposition from some of the state’s leading environmental organizations. They argue that California-style large dairies are unsustainable even with methane digesters because the machines cannot eliminate all greenhouse gas emissions cows produce, and because the dairies have other damaging impacts on water quality.

They’ve lobbied against Newsom’s budget request, and against a separate bill that would give the Public Utilities Commission more authority to give grants to dairies.

“It’s not even a Band-Aid fix,” said Rebecca Spector, West Coast Director at the Center for Food Safety. “You still have the problem of, how are these farms going to get rid of all the manure produced by these dairy cows?”

California’s cap-and-trade program sets targets for industries to slash their greenhouse gas emissions over time or buy pollution credits at state-run auctions if they can’t scale down their carbon footprint. The state uses revenue from the auctions to seed other greenhouse gas-reducing projects, like mass transit and rebates for electric cars.

Dairies account for more than half of the state’s methane emissions through manure and from cow burps and farts, according to the California Air Resources Board. By 2030 dairies must cut methane emissions by 40 percent to comply with a 2016 state law.

Dairymen argue they’ll struggle to hit the target with methane digesters, and that the projects are so successful they deserve even more money from the state.

“It shouldn’t be a hard ask,” said Michael Boccadoro, a dairy industry lobbyist. “I can make a strong argument that this is the best project the state is investing in right now.”

How dairies make money off of manure

California handed down its first cap-and-trade funded grants to support dairy digesters in 2014. Those projects feature a cap over a manure pond that gathers methane. A small power plant at each site burns the gas, fueling larger utilities like the Sacramento Municipal Utility District.

Gov. Jerry Brown’s administration put $250 million from cap-and-trade revenue into the digesters since 2016, and most of the newer projects no longer hook into utilities.

Instead, they gather methane from multiple dairies, funnel the gas to a central plant and turn it into a compressed natural gas that can run a power plant or fuel cars and trucks.

The newer plants creating compressed natural gas are potentially profitable because they’re eligible for two kinds of incentives, one from the state and the other from the federal government, according to a December 2018 study by UC Davis agriculture professors Hyunok Lee and Daniel Sumner.

The state’s low-carbon fuel standard allows polluting industries to offset their carbon footprint by buying credits from producers of low-carbon transportation fuels. The federal government’s renewable fuel standard requires refineries to use a certain amount of renewable fuel, such as ethanol, in the products they deliver to the market.

Those two incentives could generate about $1.8 million a year for a farm, the professors wrote, citing projections from the California Air Resources Board. That’s far more than the $149,000 a year the state assumes each farm can earn from commercial gas sales.

The risk dairies face is that a change in policy could rescind those incentives and cause them to turn off methane digesters that tend to cost about $4.8 million to build.

They “could be profitable if you feel secure about how long these programs are going to last,” Sumner said.

What environmentalists say

All that money is one of the reasons that critics of the grants say dairies don’t need the subsidies.

The advocacy group Leadership Council for Justice and Accountability published a 24-page paper in April built on its analysis of state support for methane digesters from the cap-and-trade program and a separate pot of money managed by the Public Utilities Commission.

The advocacy group argued that methane digesters could give dairymen an extra incentive to increase the sizes of their herds because more cows would make more manure and more gas. That would undermine the cap-and-trade program’s goals, they say, because the cows would release even more methane when they burp and fart.

It contends the state is not paying enough attention to the dairies’ ancillary water- and air-quality impacts when it makes them eligible for cap-and-trade grants.

“We would much rather see incentives, meaning funds, going toward helping farmers transition to more sustainable practices,” said Spector from the Center for Food Safety.

Back on the farm

California dairies have about 1.7 million milking cows with the number declining slightly every year, according to the U.S. Department of Agriculture. They produce about 18.5 percent of the nation’s milk.

Sumner from UC Davis said many dairy families are hedging their bets on California, with relatives opening farms in other states with fewer regulations. He described dairymen as wealthy, but over time, they might decide they can earn more money in another location.

Boccadoro, the industry lobbyist, said dairies leaving the state would undermine California’s global warming goals, too. The cows and their methane would simply move across state lines, and Californians would still buy cheese and milk, he said.

“The whole point of this is to get other people to follow our lead, but if our policies just lead to dairies leaving here and going elsewhere we’d be a laughingstock.”

The project that Airoso joined is on track to get bigger. Maas Energy Works, one of the two companies building most of the state’s methane digesters, has grants to add six more dairies to the plant. That would have the project turning manure from 50,000 milking cows into compressed natural gas, according to the company.

Airoso is happy with the project. He said it’s capturing more gas than it was expected to gather.

“We live in a state where people tend to want to promote being green and living a green lifestyle, but then it’s also important for people to support the products that are produced here,” Airoso. said.

Adam Ashton is The Bee’s Capitol Bureau Chief. He leads a team of reporters covering California politics and government. His assignments for The Bee and its sister papers have taken him from Merced to Baghdad since joining McClatchy in 2004.