Clean Energy Fuels Corp (CLNE) Q3 2021 Earnings Call Transcript

Image source: The Motley Fool.

Clean Energy Fuels Corp (CLNE -0.87%)
Q3 2021 Earnings Call
Nov 4, 2021, 4:30 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good afternoon and welcome to the Clean Energy 3rd Quarter 2021 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions]. Please note this event is being recorded. I would now like to turn the conference over to Robert Vreeland, CFO. Please go ahead.

Robert Vreeland -- Chief Financial Officer

Thank you, operator. Earlier this afternoon Clean Energy released financial results for the 3rd quarter ending September 30, 2021. if you did not receive the release, it is available on the Investor Relations section of the company's website at www.cleanenergyfuels.com. The call is also being webcast. There will be a replay available on the website for 30 days. Before we begin, we'd like to remind you that some of the information contained in the news release and on this conference call contains forward-looking statements that involve risks, uncertainties and assumptions that are difficult to predict. Words of expression reflecting optimism, satisfaction, current prospects, as well as words such as believe, intend, expect, plan, should, anticipate, and similar variations identify as forward-looking statements, but their absence does not mean that the statement is not forward-looking. Such forward-looking statements are not a guarantee of performance and the company's actual results could differ materially from those contained in such statements. Several factors that could cause or contribute to such differences are described in detail in the Risk Factors section of Clean Energy's Form 10-Q filed today.

These forward-looking statements speak only as of the date of this release. The company undertakes no obligation to publicly update any forward-looking statements or supply new information regarding the circumstances after the date of this release. The company's non-GAAP, EPS and adjusted EBITDA will be reviewed on this call and excludes certain expenses that the company's management does not believe are indicative of the company's core business operating results. Non-GAAP financial measures should be considered in addition to results prepared in accordance with GAAP and should not be considered as a substitute for or superior to GAAP results. The directly comparable GAAP information, reasons why management uses non-GAAP information, a definition of non-GAAP EPS and adjusted EBITDA, and a reconciliation between those non-GAAP and GAAP figures is provided in the company's press release, which has been furnished to the SEC on Form 8-K today. With that I will turn the call over to our President and Chief Executive Officer, Andrew Littlefair.

Andrew Littlefair -- President and Chief Executive Officer

Thank you, Bob. Good afternoon everyone and thank you for joining us. The country continues to climb out of the pandemic-induced economic slowdown this last quarter, which helped the ongoing recovery of the transportation sector and our fuel volumes. We also added new customers to our roster of those fueling with our ultra-clean renewable natural gas or RNG and we made significant advancements in securing future supplies of RNG. All in all, a very good quarter. Our fuel volumes exceeded 100 million gallons for a second straight quarter, coming in at over 104 million gallons, an increase of about 7% from the third quarter of last year. Our revenue was up very healthy 21% to $86 million for the 3rd quarter even after the non-cash charge for the Amazon warrants. Without that charge, revenue would have been $88 million, a 24% increase over the 3rd quarter of last year. Our RNG volumes of 42 million gallons grew 5% from a year ago, demonstrating the increasing demand for the negative carbon intensity fuel and Clean Energy's ability to deliver large volumes of RNG. Adjusted EBITDA for the quarter was $13.4 million dollars, a 22% increase over the same quarter a year ago. We ended the quarter with $260 million in cash and investments leaving us in a strong financial position as we continue to invest in future RNG supply and further expand our fueling infrastructure for our large new customer Amazon and other fleets.

We communicated to you earlier in the year that we pivoted our business to focus on the expansion of our RNG offering and to begin to control more of our own destiny by investing in the production of new RNG supply. All fleets are looking to decarbonize which is why a fuel that can be rated negative carbon intensity is so appealing. Fleets, including some of our long time customers like the transit agencies in LA, Dallas and New York easily and quickly switched to RNG because their buses were already equipped with natural gas engines and the existing fueling infrastructure could be immediately -- could immediately deliver our organic renewable fuel. Other customers like Amazon are deploying their first alternative fleets and they are choosing RNG. The risk for them is negligible because the heavy-duty trucks are equipped with the proven Cummins engine and immediately have access to a national existing fueling infrastructure. Amazon began rolling out their fleet of heavy duty RNG trucks less than a year ago and Amazon trucks have already fueled at over 85 Clean Energy network stations in 21 states around the country. That number does not include the additional stations we announced we would be building to accommodate the deployment of the Amazon fleet as the new anchor customer. We expect those new stations to begin coming online starting in early 2022 as Amazon continues to expand its fleet. RNG is a drop in fuel and can be directed to any of our stations for any customer that has contracted for the ultra-clean fuel.

Speaking of Cummins engines, I hope you saw the very important announcement that was made last month about a new 15 liter natural gas engine for heavy-duty trucks. As the President of Cummins Engine Business said at the announcement "this natural gas option is a game changer as a cost competitive power option to existing diesel powertrains in the heavy-duty trucking, making a great complement to reduce CO2 emissions". This new engine should make the switch by heavy duty trucking companies to RNG all that more compelling because many of their trucks need the extra power. Cummins has communicated recently that they've never been more bullish on the adoption of RNG. Besides the announcement of the new 15 liter engine, Cummins also recently acquired a 50% stake in Momentum Fuel Technologies which manufacturers CNG fuel delivery systems. Cummins also announced that their entire RNG product line of engines has received 22 certifications from the California Air Resources Board rating them 90% cleaner than a new diesel engine. It's great to have one of the most respected and trusted manufacturers of engines and powertrains continuing to make investments in advancements in the future of RNG.

The growth of RNG continues to come from a variety of customers. For example, our longtime customer Republic Services recently awarded us a contract to build new stations in Boise, Idaho and Fremont, California, that will flow RNG provided by us. The transit agency in Santa Monica Big Blue Bus reupped it's contract and we added new customers, Sacramento Regional Transit and Gold Coast Transit in Ventura, California, all representing about 5 million gallons of fuel a year. Big Blue Bus was one of our first agencies to see the long-term greenhouse gas reduction benefits of operating their bus fleet on RNG and has been a loyal customer for many years. Another long time customer, Foothills Transit, which serves a large portion of the LA Basin expressed their loyalty in a different way by awarding Clean Energy a contract to build Foothills first hydrogen fueling station. The station design, construction and maintenance agreement as well as the hydrogen fuel supply is a tremendous confirmation of our strategy to give customers what they want as they explore ways to decarbonize their fleets. Not only did we have the best overall proposal in the competitive solicitation process, but Foothill also recognized Clean Energy's past performance over the last two decades of providing exceptional service, keeping their large fleet of buses operating on CNG initially and RNG more recently. The CEO of the agency that provides an average of 14 million rides a year cited our long successful track record of building alternative fuel stations and said Foothill looks forward to continuing to work with Clean Energy as they expand into the hydrogen fuel cell technology.

This won't be the first hydrogen station that Clean Energy has built, but it is the first since OEMs -- but it is the first since OEMs of large vehicles have recently agreed to test their new fuel cell technologies. Foothill transit has placed an initial order of three fuel cell buses that will operate on hydrogen and I'd like to note that a third of the feedstock to create the hydrogen will be low carbon RNG. As I mentioned, following customers to where their alternative fuel plans take them is a long-term strategy for us. We acknowledge that there will be multiple alternatives going forward. Fortunately, by being the pioneer in building alternative fueling stations and our 25 plus years of maintaining those stations combined with our access to the cleanest fuel in the world that can be used directly as a fuel or as a feedstock, we believe we are in the best position in this evolving market.

But for any alternative to get a low carbon intensity rating, the fuel must either be low CI itself or its feedstock must be low CI. As everyone knows, it makes no sense to power a vehicle with electricity that was produced from coal -- from a coal power plant. Most hydrogen produced today is not green. That is the beauty of RNG and why we are making significant investments in its production. Fortunately, we have 2 partners in Total Energies and BP that not only bring financial resources, but have centuries of experience in the energy business as well.

I know there has been a lot of interest by many of you to hear more details about our progress in RNG production and let me assure you it's going very well. For instance, I'm traveling to the Texas Panhandle in a few weeks to participate in a groundbreaking of a new RNG facility at a large dairy. The project is one of the first that will be financed through our joint venture with Total Energies. And that same week we will be breaking ground at our fourth dairy in the upper Midwest, all of which are funded through our BP joint venture. And just last week we signed the contract with one of the country's largest dairies which is in Idaho to develop a new RNG production facility, which, when operational, will produce millions of gallons of negative carbon RNG per year. Details of these deals will be forthcoming, but please understand the RNG produce at these dairies I just mentioned will be coming online in 2023, after the facilities are built, carbon certified to the carbon intensity of the RNG and the pathways of the fuel are locked in.

But, in the meantime, we continue to secure additional RNG from dozens of third party suppliers to meet growing demand in our downstream station network. Some of that demand is coming from our Adopt a Port Finance Program with Chevron that you've heard me speak about. Over 680 RNG heavy-duty trucks have either received grants, been purchased or in the process of being financed through the program. Trucks will operate in the very busy ports of LA and Long Beach and most are owned by small companies or are owner-operated and benefited from grants administered by California State Agencies that Clean Energy helped secure. In fact, I'm proud to say that our hardworking Grants Division recently surpassed $0.5 billion mark in securing grants to purchase new RNG trucks for our customers.

I must brag about our entire Clean Energy team, they have continued to perform above and beyond expectations under difficult circumstances during these past 18 months while at the same time taking the company to a new level. The sales team brought in our biggest customer in the company's history, Amazon, which was sold on the idea of fueling their new fleet of heavy-duty trucks with our RNG. The team also signed our first LNG bunkering contract in the World Fuel Services for two cargo ships operated by Pasha out of the Port of Long Beach. When the ships begin their regular routes back and forth from Hawaii, they are expected to operate and LNG that reduces nitrous oxide emissions by 90% and carbon dioxide by 25% compared to the incumbents shipping fuel. The contract is for five years and we anticipate volumes to be at least $78 million LNG gallons.

Our engineering and construction group continues to expand our fueling footprint around the continent with 66 different station projects in progress and our superior maintenance team of men and women which keep our customers happy and asking for more. Since the beginning of the year, we've made some significant pivots with our focus on offering of renewable fuel that can make a huge difference in the effort to combat climate change, and I'm pleased to say that Clean Energy team has risen to the occasion and with that, I'll hand the call over to Bob.

Robert Vreeland -- Chief Financial Officer

Thank you, Andrew, and good afternoon everyone. Our 3rd quarter financial results were highlighted by continued volume growth, increased natural gas pricing helping drive revenues higher and year-over-year improvements in our effective margin per gallon. We also improved our cash and investment position to $260 million at the end of the third quarter compared to $254 million at the end of the second quarter. We're maintaining our guidance for 2021 with a GAAP net loss of $86 million and adjusted EBITDA in the range of $60 million to $62 million as we described in more detail in our press release. Continuing with my third quarter comments, our volume increases compared to a year ago third quarter largely came from across all sectors with some variability to around where our RNG flowed and if those volumes were incremental or already counted alongside maintenance gallons. Our RNG volume grew 5% to 42.2 million gallons in the quarter up from 40.1 million RNG gallons in the third quarter last year. We're looking forward to continued RNG growth as supply continues to grow.

Our effective price per gallon in the third quarter of 2021 was $0.77 per gallon compared to $0.59 a gallon a year ago or an $0.18 per gallon increase. This increase reflects higher prices at the pump principally from higher underlying natural gas costs as well as higher RIN and LCFS revenue. Our alternative fuel tax credit revenues of $5.3 million for the third quarter were in line with trends while our station construction sales of $2.6 million were less than a year ago and lower than more recent trends. The construction revenues can be a bit lumpy due to the timing of the underlying construction processes particularly in today's environment. We're anticipating fourth quarter construction revenues to be more in line with recent construction sales trends in the $5 million to $6 million range. Our overall gross profit margin improved in the third quarter of 2021 compared to 2020 exclusive of a non-cash contra-revenue charge of $2.2 million related to the Amazon warrants and a non-cash fair value gain in our Zero Now fuel hedge of $300,000. Exclusive of these non-cash items, our gross margin was $32.2 million in the third quarter of 2021 compared to $25.7 million in the second quarter -- in the 3rd quarter of 2020 or a 25% improvement.

Increased volumes together with the rise in our margin per gallon from a year ago were the primary drivers of this year-over-year improvement in gross profit margin. Our effective margin per gallon for the third quarter of 2021 was $0.26 per gallon compared to $0.21 a year ago. This $0.05 per gallon improvement reflects the difference between a rise in our effective price per gallon of $0.18 and an increase in our effective cost per gallon of only $0.13. With the cost of natural gas being at some of the highest levels we've seen exceeding $5 in MMBTU, I thought I would take a moment to make the point that this significant rise in the cost of natural gas did not translate to a degradation in our margin. As you've seen in this third quarter, our effective cost per gallon were up $0.13 per gallon from a year ago, but we managed an increase in revenue per gallon of $0.18 helping to drive higher overall revenues. This dynamic of the change in natural gas cost is key to understanding that rise in the cost of natural gas is not automatically a bad scenario for us as we are generally able to increase our pump prices and we have contracts that call for commodity cost to be passed through to our customers.

Our SG&A was $22.3 million in the third quarter of 2021 compared to $16.6 million a year ago, an increase of $5.7 million of which $2.7 million or 48% of the increase relates to an increase in stock compensation, as expected. We have seen some cost increases in connection with our rebranding and RNG activities which could take us to around $86 million in SG&A for 2021 including about $13 million of stock compensation. Our GAAP net loss for the third quarter of 2021 was $3.9 million dollars, which includes the effects of the non-cash warrant contra-revenue charges and the Zero Now hedge gain. Our non-GAAP net income for the third quarter was $1.6 million or $0.01 per share, which we believe is more indicative of our operating results. Our adjusted EBITDA of $13.4 million for the third quarter of 2021 compares to $11 million a year ago, which again highlighted the benefit of increased volumes and improved margins principally associated with our RNG deliveries.

Our cash flow provided from operations amounted to $19.9 million for the third quarter of 2021 compared to $3.4 million dollars in the third quarter of 2020. Exclusive of changes in operating assets and liabilities, cash flow from operations was $15.3 million in the third quarter of 2021 versus $10.2 million in the third quarter of 2020. Capex spending for Clean Energy downstream business was $7.6 million for this third quarter of 2021, which is up from $4.6 million last quarter and likely will increase again in the fourth quarter as our station building continues to ramp up. Our debt was $42 million at the end of September 2021.

On the RNG upstream supply business, we've begun spending in each of the joint ventures on equipment purchases and development expenses as we get projects moving. In the joint venture with BP, approximately $22.3 million has been spent on dairy project capex as of September. In the joint venture arrangement with Total Energies, approximately $4.7 million has been spent on dairy project capex through September. The $4.7 million was reflected in our consolidated statement of cash flow as purchases of equipment in the third quarter as the dairy project JV with Total Energies was not formed until October, at which time those assets were moved into the 50-50 joint venture with Total Energies.

And we will continue to report on the capital spend and other progress on our dairy projects as we move forward. And with that operator, we can open the call to questions.

Questions and Answers:

Operator

We will now begin the question-and-answer session. [Operator Instructions]. The first question comes from Mr. Robert Brown with Lake Street Capital Markets.

Robert Brown -- Lake Street Capital Markets -- Analyst

Good afternoon.

Andrew Littlefair -- President and Chief Executive Officer

Hey, Rob.

Robert Vreeland -- Chief Financial Officer

Hey Rob.

Robert Brown -- Lake Street Capital Markets -- Analyst

Just wanted to follow up on the JV and sort of the -- the upstream activity that you're doing, how is that -- how is that sort of supply situation right now and how much sort of supply that do you expect to come online over the next couple of years? This is, I'm sorry, your own supply over the next couple of years?

Andrew Littlefair -- President and Chief Executive Officer

Well, one way to look at is there is a lot of ways to slice all that, but as our own supply, let me speak to in a second. This year we brought on about 50 million gallons of third party, right, supply coming from other suppliers. So that's an important component to this. And as I look out over the next couple of years to -- look I think it's really important for everyone to understand these projects take 18 months to 2 years to come online and be begin to really monetize the credits and contribute. We've got about $80 million -- 80 million gallons of projects in the pipeline at present, but you know these things are coming on all the time. So that number likely it will go up over time. But since we've been at this in earnest this year, I think that's pretty good progress.

Robert Brown -- Lake Street Capital Markets -- Analyst

Okay. Okay, great. And then maybe on the Cummins 15 liter engine that you talked about. How do you sort of see the market expanding with that engine coming in? What kind of customer growth do you think that can help drive and how do you view that engine?

Andrew Littlefair -- President and Chief Executive Officer

You know, Rob, we've look at this a long time and the current 11.9 liter engine is really very adequate for the day cabs, right. And a lump -- so much of our customers at this point are regional day cabs. And the 12-liter is a good -- is good for them. However, I think it's important to recognize that percent probably, someone could correct me on this, but it's in that neighborhood of 75% of the diesels that are being purchased are more like our 15 liter diesels, right? So in order to give the -- to have the flexibility to run the routes and terrain and sleeper cabs and kind of be able to take care of the full breadth of what you would like to have that over-the-road truck do and to give the driver the torque and horsepower, that 11.9 is in around 1450 in terms of torque and this engine will be rated -- it will have a -- it will be variable but it can go up to 1650. So you're going to have more horsepower and more torque. It's going to be able to handle the heaviest loads, it's going to be able to give that driver of the power that they really like.

And look one of the things that these trucking companies are needing do is make sure they have happy drivers, right? I mean, keeping drivers is really key and so I think this 15 liter, it's going to be a ground up engine. Now it's coming with -- it's been on the road now in China. It's going to be actually manufactured and assembled with American parts and American labor here, hoping that's going to get it to the market a little bit faster. It's going to have increased fuel efficiency as well. So we've always had a little bit of a efficiency penalty sometimes ranging between 8% and slightly more. I think this engine should be able to try to cut that in half. And so increased fuel efficiency, increased torque, horsepower, it will really be able to do everything that we -- that you would want an over-the-road truck to do. So we're very excited about it and I think it really fits out the the entire offering that Cummins now will have, the 6.7, the 9, the 12 liter and now the 15. I imagine over time the 15 will end up being the workhorse and replaced the 12.

Robert Brown -- Lake Street Capital Markets -- Analyst

Okay, great, thank you for the opportunity, I'll turn it over.

Operator

Your next question comes from Eric Stine with Craig-Hallum.

Eric Stine -- Craig-Hallum -- Analyst

Hi Andrew, hi Bob.

Robert Vreeland -- Chief Financial Officer

Hi.

Andrew Littlefair -- President and Chief Executive Officer

Hey Eric.

Eric Stine -- Craig-Hallum -- Analyst

Hey, so, obviously volume recovery underway. I'd love -- love it if you could maybe just drill down in your various end markets. And then, curious whether you're willing to give kind of an early view of what you think volumes might be in light of this recovery in 2022?

Andrew Littlefair -- President and Chief Executive Officer

Yeah. Bob has got some of the numbers there. We've seen a participation in all of our segments. We're bringing on, let me -- let me just in Rob will speak to that. The airports are not back fully. We all had been at airports and we -- you know that they're not quite firing all cylinders. But we've seen tremendous recovery there. Our refuses is ahead of plan as is our transit. So we're -- we like where we -- where we stand on that. Now, trucking because of in 20 -- looking forward, the trucking because of Amazon is -- we're bringing on a lot of -- a lot of new trucks. And so we are very excited about the growth rates that we'll see in the trucking business. But you know we're making our jobs difficult right, because we want to shift more and more of it to RNG. That's what our customers want and we obviously want that, but at the same time we're really putting -- pressing on the pedal on the adoption, which is what we've always tried to do. So, it just puts -- it puts more strain on us to bring more RNG on faster. And certainly as we bring on Amazon and some of the other big customers like them that want this RNG. Bobbie may be able to get into some more specifics there.

Robert Vreeland -- Chief Financial Officer

I think, I mean the -- we continue to see kind of year-over-year growth in refuse, transit was in double-digit, the airports where actually, the kind of fleet area was certainly a positive growth there, which that has taken a while to really start to come out of the recovery, but we're actually now seen kind of year-over-year growth there. So yeah. And then as well as kind of the trucking considering the RNG optimization and that sort of thing. So it was kind of across the board. And as we look as we look at next year, I think we've -- at least preliminarily said we are looking at kind of 10%-ish type number and on the volume, but more to come on that, I guess.

Eric Stine -- Craig-Hallum -- Analyst

Got it. No, Fair enough on that, look, maybe just with the RNG. Andrew. I think you mentioned that you've got the pedal down and you need to keep up with that and I know these projects don't come on overnight. I mean, do you feel like what you see in the market given the investments of some of the whole market that you will be able to satisfy that demand? I mean, I know you will once you have all of your projects up and running. But in the interim, while those are in development, do you think you're able to kind of keep up with the volume growth you may see from Amazon and others?

Andrew Littlefair -- President and Chief Executive Officer

Well, I think realistically, Eric, you know, there's going to be challenging quarters in this next year or so until we get some of our on that. Look, the projects I've talked about, the 80 million project -- 80 million gallons of RNG projects I talked to the pipeline, it needs to be significantly larger than that. I would like to think there is a time with one of the fleets that we've talked about today, could take that much RNG -- twice that much RNG. Just one fleet. So we're just in the very early innings of the RNG supply game, right. And with just -- Just to review, the supply resource, when you look at landfill, wastewater and manure from livestock is on the order of somewhere between 25 billion and 30 billion gallons annually. Now that's many years from now. But that's a long bridge that could could take 15 years, 10, 15, 20 years to develop. So there's a lot of room here. I think the lowest hanging fruit is in the -- is in the dairy space.

There's still plenty of large dairies to come and medium-sized dairies, that's on the order of 3 billion to 4 billion gallons. Remember, the industry is at 400 million gallons. So we're just getting started in this industry. And let me tell you, there is a lot of money pouring in. We're well positioned because it won't all be our own supply, but we are able to avail ourselves to this third-party supply because we have the network. So yeah, I like the. I like the position where we are, but there will be -- there will be quarters next year especially if we do a good job on the demand side with some of these large fleets where it will be nip and tuck in terms of whether or not we have exactly all the RNG we'd like to have in the commitments that we've made. All of our customers want the lowest RNG they can have and I think over time that's going to be -- we're going to be able to supply that. But I think in 2022, I can see periods where it could be -- it will be -- it will be a challenge to get all that we would like to have. Does that makes sense Eric?

Eric Stine -- Craig-Hallum -- Analyst

Yeah, yeah, That's, no, good. I guess good problem to have. But yeah, it's something [multiple speakers].

Andrew Littlefair -- President and Chief Executive Officer

Well, that's why. it is sort of a good problem to have. It's not a long-term problem, but it's one that I think we just have to recognize that it's -- you bring on like this -- Amazon in their sustainability report talked about 2,700 trucks. So if you just kind of use that as a placeholder and multiply that kind of an average number, you can see that annual number that you could see that that alone would require 40 million gallons. Right? So as these other big fleets pay attention to that and want the RNG, and frankly, as we've discussed in this call before when they look at their other alternatives and availability of those alternatives, I'm talking about electric and fuel cell, RNG is what's here today and it's what's near-term and it's what's cost effective and efficient and available. And so these other fleets are looking at what Amazon is doing and there is a little bit of an Amazon effect going on also right now.

Eric Stine -- Craig-Hallum -- Analyst

Okay, thanks for the color.

Andrew Littlefair -- President and Chief Executive Officer

You bet.

Operator

The next question comes from Manav Gupta with Credit Suisse.

Manav Gupta -- Credit Suisse -- Analyst

Hey guys, just wanted to pick up some clarification questions and bear with me a little here. You said 80 million gallons of projects are kind of in the development. So could you confirm all of them are in the Dairy Farm RNG or there are some landfills because in the past I think Bob you have indicated that for Dairy Farm RNG, it's about $15 million to $20 million per gallon. So to hit that 80 million gallon number, we are looking at the capital deployment of $1.6 billion to $1.2 billion between you and your partner. So, is that math right or if it's wrong, can you help me out?

Robert Vreeland -- Chief Financial Officer

Okay. No, it's not -- it's not wrong but that references really more toward offtake, other partners not ours. Okay. So there is two pieces to our supply, it's what we get as an offtake partner just taking gas not producing it and that's what Andrew was really referring to there that we've already signed up 50 million gallons of supply contracts from others. And we've got another 80 million there because we need that gas right? Because our gas is not going to fulfill our needs for a few years. Okay?

Manav Gupta -- Credit Suisse -- Analyst

[Multiple Speakers]. So 50 million is that other then 30 million is yours. I'm just trying to understand between you and your -- to your two JVs, what's the pipeline in million gallons? What's that number looking at right now?

Robert Vreeland -- Chief Financial Officer

Okay. The 50 million that we've secured and the other 80 million has nothing to do with our JVs. Okay that's coming from other supply sources that's offtake. We kind of refer to that as other offtake that we are -- that we will secure. Then our JVs, Andrew spoke to that somewhat with Rob's question in terms of like what is our volume going to be in '23, '24 and beyond, and I will say that we're -- we're still tallying that number, if you will, when we start to really get into -- our hope is that we'll even provide more color on that in February when we do our year-end because while you've maybe heard us say this, and there's not a lot of quantification around it, there is a lot going on where we've got -- we're just picking out a lot of deals. So we want to get those a little bit more tied up, if you will, and then we can start to say exactly what the what some of the numbers will be. But you're looking at double-digit volumes from our -- from our JVs in '23. All right? And I think and I'm -- and I'm thinking, certainly more than 10 million right and more on the way weighted fact you know above somewhere in that 25 million and above, somewhere in that 20 million and above, somewhere in there. And that's just even a little starting point right now from what I know and it's still moving.

Manav Gupta -- Credit Suisse -- Analyst

Perfect. I won't press you on the number dairies or anything. I just have a quick follow up here is as you meet [multiple speakers].

Robert Vreeland -- Chief Financial Officer

Well, the dairies. I mean obviously more presses on that. You know I thought maybe you would press us on the number of cows, but because they have to -- well really, you do have to define what you mean by a big dairy or a small dairy or a medium dairy so then you get down to the cows. But it's not -- it's not like 150 dairies that we have to deal with in terms of where -- as we're looking at our number. I can tell you that right now. It is the number of dairies is smaller than that because these dairies have some substantial -- these dairies have some substantial cow heads.

Manav Gupta -- Credit Suisse -- Analyst

Perfect. My quick follow up here is, as you come across all these customers who want your RNG, are the customers pressing you specifically as saying I want zero or below zero carbon RNG or they are more or less agnostic and saying, fine deliver even landfill RNG? Are the customers starting to make a distinction as to the carbon intensity of the RNG as you're interacting with them?

Andrew Littlefair -- President and Chief Executive Officer

You know, it kind of depends, Manav, they are. They're becoming more educated and it depends where they're located. It just kind of depends what cycle they're in terms of their sophistication. I imagine if you sat with the customer and walk them to that they could have the lowest CI fuel available, they want it, right? But not all customers need that right now and I think that most customers understand that as you bring on the lower CI, that number comes down. For instance, our number on our portfolio is coming down right from 30 or 40 positive or even higher than that as you looked at it, it used to be almost all landfill and in this quarter and the next quarter, it's going to be very close to negative and we'll begin to share that with you over time. I'm not really prepared to do that at this time. But, so -- and it's because we're able to blend our portfolio and bring down the landfill with that super negative CI gas. So it will continue to go lower over time and we'll be able to serve our customers more and more negative fuel over time. [Multiple Speakers]. It's all -- it's not -- it's not that a land landfill gas isn't good, Right? I mean it's already 50% less than what the existing diesel fuel is in terms of carbon. So it's -- you're headed in a good direction at the get-go. But it can be, as we all know, it can be lower than that and it will be lower than that as we go.

Manav Gupta -- Credit Suisse -- Analyst

Perfect. My last question is, we saw a deal where you're looking to supply some LNG to ships and I'm trying to understand as again you -- you're out there talking to everybody. Do you feel there is a possibility that going ahead more ships globally could be looking to switch to something cleaner than running something like a bunker fuel, which is an extremely unclean fuel to run?

Andrew Littlefair -- President and Chief Executive Officer

Right. I like burning asphalt right, Manav, as you know,

Manav Gupta -- Credit Suisse -- Analyst

Right.

Andrew Littlefair -- President and Chief Executive Officer

No, I think there is -- I mean I'm a little rusty. There is international compact it was sanction out of the UN where this bunker fuel is being moved out, right. And local jurisdictions, be it in Singapore, Hong Kong are certainly here in the port of LA and Long Beach, I mean, they've already put in rules where you have to switch over to reformulated diesel, which was a big change from bunker and now they're requiring a lowering. So, yes, it's happening all around the world. I think the US is behind on that. But you see shipping, well there is there's a lot of LNG at the ports, at these world wide ports. So in Rotterdam and in these other places, you're seeing more and more LNG shipping. It's kind of sort of surprising. I also think that our friends at Carnival Cruise has ordered LNG ships and maybe as many as 11 of them, in my mind, 9 to 11. So yes, this is a long-term trend. These are long-life assets and you'll see it happening more and more all around the world. Now it takes a while right to build a new ship, to repower a ship, and so this is -- this is like buying a new truck.

Manav Gupta -- Credit Suisse -- Analyst

Thank you for taking my questions.

Andrew Littlefair -- President and Chief Executive Officer

Yeah. You're welcome.

Operator

The next question comes from Craig Shere with Tuohy Brothers.

Craig Shere -- Tuohy Brothers -- Analyst

Good afternoon.

Andrew Littlefair -- President and Chief Executive Officer

Hey, Craig.

Robert Vreeland -- Chief Financial Officer

Hi Craig.

Craig Shere -- Tuohy Brothers -- Analyst

So, the Idaho dairy projects that you mentioned that sounded really big. I was a little unclear if you were talking about something in the JVs or if you're looking at anything outside of that?

Andrew Littlefair -- President and Chief Executive Officer

It's inside, that it's in one of the JVs.

Craig Shere -- Tuohy Brothers -- Analyst

Okay,

Andrew Littlefair -- President and Chief Executive Officer

So that's our -- that's our production, our upstream for our account with our partner.

Craig Shere -- Tuohy Brothers -- Analyst

I got you.

Andrew Littlefair -- President and Chief Executive Officer

And it's really -- and it's a really big dairy.

Craig Shere -- Tuohy Brothers -- Analyst

But that's still to come online in 2023?

Andrew Littlefair -- President and Chief Executive Officer

Yeah. Latter part.

Robert Vreeland -- Chief Financial Officer

Probably not at January.

Craig Shere -- Tuohy Brothers -- Analyst

Okay. And when something is that big, can it be ramping for a year or more after -- after you start delivery when you have your line of improving your theoretical transportation to California and CARB-certified? Does it take a while to get to full capacity?

Andrew Littlefair -- President and Chief Executive Officer

Well, you know what happens originally just to kind of take you through this, so when you start on production, it doesn't take the full -- I've always talked about 18 months to 2 years. You're on commercial production and you're producing RNG and yeah, of course, there is a little ramp up shake out period and all that. But it comes on and it comes on fairly -- fairly in a robust way. It's not a long -- I'm going to speak to how you increase it, but it comes on at the expected volumes pretty quickly. But you're producing it while you're waiting for some of the certificates on the -- on the CI. You're storing. So you're not -- so you're in -- you're in production, but you're storing the RNG and then you're turning it loose after -- after you get the CI. So that's sort of good news of what otherwise seems like an interminable start-up phase is that you are actually on production. Now like at this dairy, and I'm just trying to be a little careful on it because we're going to do a little bit something more with it here later, but there is -- there is our designs to literally add 10s of thousands of more cows to it over time. So that's how you're going to get more volume out of this as well. So it's already about the second largest area, it's going to grow dramatically. So it's a big one, and we're really excited about it.

But -- and then what you're going to also see Craig just as these things go, there has been a lot of consolidation in dairies already. And I'm sure there are a lot of good parts and probably not so good parts as these things consolidate, but one of them, from our point of view, is it does make them, as they get larger, as they get folded together, it makes -- it brings them into -- into the scale that we -- that we need. So that's a good thing. And then what you'll see is there is kind of this infill clustering of nearby farms, not unlike what we've seen in the oil patch, right, gas patch where you have gathering systems from several dairies and you wheel it into a central digester and that's starting to -- that's just getting underway, but there's going to be great potential for that as well. This is a new industry with lots of new parts to it. None of it's super -- that does not a lot of technology risk, but just a lot of things happening on it as people get more sophisticated.

Craig Shere -- Tuohy Brothers -- Analyst

And maybe I missed it, I apologize. It looked like though there is a lot in the pipeline, I understand, third quarter RNG was lower than second quarter? Did I see that correctly?

Robert Vreeland -- Chief Financial Officer

Let's see at 42, I think it was yeah, it may have been down a little from second quarter.

Craig Shere -- Tuohy Brothers -- Analyst

Is there anything specific around that? Are there would over time will there be hiccups to this or would we get to a point where it is consistent, every quarter should be higher as all these investments start kicking in?

Andrew Littlefair -- President and Chief Executive Officer

[Multiple Speakers]. it's like anything else, sometimes you're going to have certain supply sources have a hiccup. Occasionally, one doesn't get -- we don't get reupped on it. Over time, as the volume grows you won't notice it.

Robert Vreeland -- Chief Financial Officer

Yeah, I think it's the latter. What is -- as this thing -- right now, you're a little bit susceptible to seeing that a real live operational matter. I will say though that we still are pretty diverse and spread out on all of our supply sources so were frankly in a much -- in a much better position than maybe others where they kind of tie their supply in one or two projects.

Andrew Littlefair -- President and Chief Executive Officer

We did have some of that change was because of a weather event and a hurricane. So, those kinds of things will happen, but as we grow these different projects that I talked about earlier that all should be going north all the time.

Craig Shere -- Tuohy Brothers -- Analyst

Right and my last question, just want to pick up on Manav's question about fleet customers CI demand. If I understood correctly, it all comes down to geography and function and correct me if I'm wrong, but you know all the low CI nationwide, if it has the path, is going to California because of LCFS and I mean that there is a little in Oregon. But, I think pretty much going to California, which, over time as it starts to grow quicker than the California RNG market or the California CNG market, that they will start to push landfill gas out of California to start filling things nationwide because Amazon and other fleet operators all across the country want to have some of that new tanks outside of California. And then over time, the other CNG just whatever you want to call it, brown or whatever, that you're using, over time that moves out of your filling stations and eventually is going to be more for the say that maritime bunkering market. Get into other areas where they're not going to be as focused as early, maybe not for a decade, on the RNG. Am I saying that right?

Andrew Littlefair -- President and Chief Executive Officer

I think you -- I think you are. I think this right. You know, we already of the fuel we sell, we're already at 70 some odd percent of its RNG right? And, but you're right. So fossil fuel is -- will be replaced by RNG over time. However, I don't know, maybe the railroads will use it as LNG. It would be a significant improvement over what they've got going on and they use a lot of fuel. So yes, I think you're exactly right, there'll be other markets where you are competing as very dirty unregulated sources and fossil will go there. And then one other thing. Craig, that we didn't touch on, and it's important I think because this isn't just going to be a -- is not just California story, right? So I'd like to think that in 2022, New York who will adopt a low carbon fuel standard and typically when New York does that, and it's got good support in both houses right now, then stay in the house, then normally the North East Compact 13 states looks at too. And, then there are other study legislatures are studying RNG in several states, Illinois, Pennsylvania, Michigan. So it's not inconceivable that -- and this doesn't usually happen all one year. It takes sometimes legislatures a couple of years, but it's not inconceivable that by 2024 you could have 10 or more low carbon fuel states. So you've just increased the demand and the markets for the low carbon fuel standard. That's next.

Craig Shere -- Tuohy Brothers -- Analyst

That would be a lot of demand.

Andrew Littlefair -- President and Chief Executive Officer

Which is big -- which is a big deal.

Craig Shere -- Tuohy Brothers -- Analyst

Yeah. Yeah. I appreciate it. Thank you. Thank you very much.

Andrew Littlefair -- President and Chief Executive Officer

You bet.

Operator

The next question comes from Pavel Molchanov with Raymond James.

Pavel Molchanov -- Raymond James -- Analyst

Thanks for taking the question. All right. I'm going to ask about our friends in Washington again. So obviously we got the Build Back Better, at least a current version published last week and there is an interesting low carbon fuel credits, which has never existed before at the federal level. Do you know how that is going to work for your product in terms of will you be collecting the low carbon fuel credits or the natural gas fuel credit or both?

Robert Vreeland -- Chief Financial Officer

You know, Pavel, I think, I have that bill like you have and it's a barnburner like 2,200 pages, by the way it's changing as you go over here. I think the LNG credit that you're speaking of, I believe and I was looking at it this morning. I think that's on the producer side. It's a producer tax credit, I believe. Now I've been working on a different one and that's not in this bill. So I'd just have to say that's all I know about it, is I believe is for the production. So it's a tax credit for the production, I think. I do know that the current Build Back Better that you and I was talking about has a five year extension of the alternative fuel tax. Our Fuel Tax that we've had for all these years is in there extended from five years.

Pavel Molchanov -- Raymond James -- Analyst

So that's what you [multiple speakers].

Robert Vreeland -- Chief Financial Officer

But -- but there isn't a new RNG Fuel Tax Credit collected at the pump.

Andrew Littlefair -- President and Chief Executive Officer

Yeah, I wish there was in there but I don't believe there is I think there is. I think it's something that's out of theoretically at a farm, almost like a production tax credit and I don't know how it works.

Pavel Molchanov -- Raymond James -- Analyst

Okay, understood. And same thing, except I suppose as a potential competitor to you guys. You've talked about green hydrogen being being scarce and being expensive, completely true at the moment. If that ends up being subsidized to the tune of, I think up to $3 a kilo is what the reconciliation package contains, do you envision scaling up from kind of a de minimis levels of today? In other words, how much -- how much would that help for the hydrogen food chain?

Andrew Littlefair -- President and Chief Executive Officer

It will help. I mean, of course, it would help. It's got some more ways -- it's got a ways to go, right? Because we've just price some of the most cost effective, a third of it being green hydrogen and it is more like $11 a kilogram which is $11 a gallon. So $3 would help. The infrastructure is really difficult and that has to get factored into the fuel price, right? It's the infrastructure for hydrogen today is very, very expensive. So of course that -- those kinds of things will help and of course vehicles are super expensive. So I think it would help. It doesn't make it a no-brainer by any stretch.

Pavel Molchanov -- Raymond James -- Analyst

Right. But last question kind of more big picture. We have not seen $80 oil for seven years. But we have also not seen $5 natural gas or probably about that long, maybe even longer. How do you kind of reconcile those two things pushing and pulling in opposite directions?

Andrew Littlefair -- President and Chief Executive Officer

Yeah. And you know the refined product. Right? We're seeing the price of diesel at the pump in the Port of LA at $4.76 and so that's about as high as it's been, I think we saw $5 when we had $100 oil, so it's not far off there. I always have to bring people back to the -- and so I used to talk about this and probably confuse everybody. But you know you remember years ago Pavel that we always used to talk about the oil versus natural gas and BTU equivalents, right? And it was -- it was sort of 6:1 on the BTU equivalents, but it's always traded more like 7:1. So at this $5.25 or $5.50 wherever it is versus $84, it was at 16:1. So it's still -- it's a 15:1, 16:1. So it's still sort of on the upper part of the range. Now if you roll back in what, a year or two ago at $2 gas and whatever it was, we were 23:1. But then, I have to remind you as well. I didn't believe you would see $5 gas like this and I still believe it will come down at some point here, but recall you get 7 gallons -- 7.2 gallons of diesel per Mcf of gas. Sso let's just say the price of natural gas, which you did, I mean essentially went from $3 to $5 sounds like just a hell of an increase, well, that's $2 divided by $7. So it's about $0.30 a gallon by feedstock went up. And as Bob covered, we were able to pass that through either because that's where our contracts are or of the 20% or 30% that we control that's at spot we we're able to pass that through. Because we're competing with diesel that went up on average over this last 6 months $0.60. And so we are still able to give our customer, which is unique to us, $0.60 to $0.70 or more discount per gallon relative to diesel and we absorb that increase in natural gas prices. So I just do not have all that, but the truth is, we have been able to move through it fine, we increased our margin, our customers still have a nice discount and we absorbed it.

Pavel Molchanov -- Raymond James -- Analyst

Right, thank you very much guys.

Andrew Littlefair -- President and Chief Executive Officer

Okay, thanks.

Operator

The next question comes from Jason Gabelman with Cowen.

Jason Gabelman -- Cowen -- Analyst

Hey guys, good afternoon.

Andrew Littlefair -- President and Chief Executive Officer

Hi, Jason.

Jason Gabelman -- Cowen -- Analyst

Thanks for -- Yeah, hey. Thanks for providing the detail on the spend on these upstream joint ventures. That's helpful. Can you just clarify, is that your share of equity spend or should I be thinking about that spend differently? Yeah.

Robert Vreeland -- Chief Financial Officer

Okay. Real quick on that, that is the total spend at the JV.

Jason Gabelman -- Cowen -- Analyst

Just equities, excluding debt?

Robert Vreeland -- Chief Financial Officer

Exactly. It's --

Jason Gabelman -- Cowen -- Analyst

Okay.

Robert Vreeland -- Chief Financial Officer

It's, well, it's either -- I'm -- I wouldn't clarify whether it's debt or equity, it's thus -- it's the capital ex -- capex spend at the JV is the number I gave.

Andrew Littlefair -- President and Chief Executive Officer

As of the end of September.

Robert Vreeland -- Chief Financial Officer

As of the end of September.

Jason Gabelman -- Cowen -- Analyst

Okay. And so, yeah. [Multiple Speakers].

Robert Vreeland -- Chief Financial Officer

And technically, we're in for half of that, but just a reminder, the BP -- the JV that we have with BP, we each -- we already have our money in there that's off my balance sheet. So I'm just giving you what that JV has spent and then as well on the Total Energies is a little different because that's on a project-by-project basis.

Jason Gabelman -- Cowen -- Analyst

And has that spend been kind of ratable over the last 6 months or is it really just ramping up and do you expect it to continue to ramp up?

Robert Vreeland -- Chief Financial Officer

It's ramping. Yeah, it's ramping. So I -- that -- it's going quick.

Jason Gabelman -- Cowen -- Analyst

And then my other question just on the downstream business, 4Q EBITDA guidance is implied to be pretty strong relative to where it's been the rest of the year. I was hoping you could just provide some context about that. And then as you're RNG volumes ramp up in that carbon intensity score goes down, do you expect your margin -- your gross margin per gallon to improve from that $0.22 to $0.26 per gallon range that you've been discussing? Thanks.

Robert Vreeland -- Chief Financial Officer

Okay. Yeah, On the -- so on Q4, you kind of have to look historically a little bit. Q4 over the past four years, we've, in addition to our normal business side stuff we've -- we've had some other income in there which principally was related to our earn out. So there's a little bit of help in there. I'm not saying it's the bulk or anything, but that's a nuance that those that are new to the story would look back and say, OK, yeah, they've had a little bit of annual earn out from a deal we did in 2017, where we had sold some upstream assets and contracts to BP and so we are still taking that in. So that -- that helps that number, some. So you're correct on kind of looking at the implied '21 and that's not all coming from margin, but it is absolutely EBITDA. I mean, because it is core earnings and we collect that cash in the earn out and we collect the cash in Q1. And then the second part of the question?

Jason Gabelman -- Cowen -- Analyst

On margin.

Robert Vreeland -- Chief Financial Officer

On the margin. Yeah, so you'll see that -- well, so without giving all my '22 guidance -- yeah but that range should move up. Okay, I'm expecting that range to move up, as I look forward and part of that is -- part of that is the bringing in more dairy as well as continuing to grow higher margin fuel gallons. So there is a couple of impacts that you can have there on that margin.

Jason Gabelman -- Cowen -- Analyst

Great, thanks. I appreciate that. Yeah.

Robert Vreeland -- Chief Financial Officer

Thank you.

Operator

The next question comes from Greg Wasikowski with Webber Research.

Greg Wasikowski -- Webber Research & Advisory -- Analyst

Hey, good afternoon Andrew and Bob, how you doing?

Robert Vreeland -- Chief Financial Officer

Good, hi Greg.

Andrew Littlefair -- President and Chief Executive Officer

Good Greg.

Greg Wasikowski -- Webber Research & Advisory -- Analyst

It's nice to officially be on the call.

Robert Vreeland -- Chief Financial Officer

There you go.

Andrew Littlefair -- President and Chief Executive Officer

Good, Welcome.

Greg Wasikowski -- Webber Research & Advisory -- Analyst

Thank you. I wanted to go back to one of your previous answers talking about additional LCFS programs in other states. And I'm just curious, could you speak to how that factors into the economics in your decision making when it comes time to sourcing dairy farms? Are you -- are you currently or will you soon be considering locations on the East Coast or in the Northeast region based on that assumption?

Andrew Littlefair -- President and Chief Executive Officer

Well, you know, we do that already, right? So I mean we're taking them where they come and we have in Wisconsin, upstate New York, North Carolina. So, I guess in a perfect world, you will move that fuel to the closer LCFS state rather than dragging it all the way to California because you do end up having some pathway cost in terms of hit-hit on the CI and therefore less -- less value. So you'll move it, you'll begin to move it to the closest best you can to work your portfolio, you'll move it to the closest LCFS state. But -- but I wouldn't say that we're going to start cherry picking locations. I mean we -- we're trying to bring it on anywhere we can get them.

Greg Wasikowski -- Webber Research & Advisory -- Analyst

Got it, OK. Thank you. And you also mentioned the Amazon effect in an earlier answer and it's iomething you guys have talked about quite a bit on the past calls, but any update there and what you're seeing in terms of vendors or suppliers making the switch in response to Amazon or at Amazon's direction?

Andrew Littlefair -- President and Chief Executive Officer

Oh, I can't really talk about the last part of it is, but let's just say that it looks to me like Amazon is fully engaged, the deployments are ongoing. We're providing them good fueling experience in 21 states. And there is many more trucks to come online, they have, and I know that they do do things to look at their SCOPE 3 emissions and as we've discussed before, they have a very big vendor pool and supplier pool. And we hope that we'll design a program with them some time to address that. But there's nothing specific I can give to you on this call.

Greg Wasikowski -- Webber Research & Advisory -- Analyst

Okay, fair enough. That's it from me. Thanks guys.

Andrew Littlefair -- President and Chief Executive Officer

All right. Thank you, Greg.

Operator

This concludes our question-and-answer session. I would like to turn the conference back over to Andrew Littlefair for any closing remarks.

Andrew Littlefair -- President and Chief Executive Officer

Thank you operator and thank you everyone for joining us today and we look forward to updating you on our progress next quarter. Have a good day.

Operator

[Operator Closing Remarks]

Duration: 68 minutes

Call participants:

Robert Vreeland -- Chief Financial Officer

Andrew Littlefair -- President and Chief Executive Officer

Robert Brown -- Lake Street Capital Markets -- Analyst

Eric Stine -- Craig-Hallum -- Analyst

Manav Gupta -- Credit Suisse -- Analyst

Craig Shere -- Tuohy Brothers -- Analyst

Pavel Molchanov -- Raymond James -- Analyst

Jason Gabelman -- Cowen -- Analyst

Greg Wasikowski -- Webber Research & Advisory -- Analyst

More CLNE analysis

All earnings call transcripts