Oil and Gas Investor Magazine: On A Mission To Mitigate

On A Mission To Mitigate: Industry Vs. Methane Leaks


Joseph Markman
Senior Editor, Digital News Group Hart Energy
Safety, economic and public perception risks compel oil and gas players to push for a fix before the methane leak issue exacts a high price.

Source: Shutterstock, Hart Energy

Methane leaks bedevil the oil and gas industry throughout the value chain, posing threats to safety and economics, and already bestowing a black eye to the industry’s beleaguered environmental reputation.

The issue also disrupts the industry’s narrative that natural gas is superior to coal as a source for power generation because of reduced greenhouse gas emissions. A 2014 study revealed that when methane leaks of an assumed 1.5% in are figured in, there is no significant reduction in carbon dioxide emissions without a climate policy in place.

“Methane is a potent greenhouse gas and the primary component of natural gas,” said the Environmental Defense Fund (EDF) on its website. “In its first 20 years, methane has more than 80 times the global impact of carbon dioxide.”

With industry under pressure to find a fix, some have already decided that a regulatory scheme is the best solution.

“We have to work with governments,” urged Rachel Kyte, CEO of Sustainable Energy for All and Special Representative of the UN Secretary-General for Sustainable Energy for All, at this year’s World Gas Conference in Washington. Kyte said she wants “to have governments put very strong regulations in place to make clear that we have to plug the methane leaks.”

However, several partnerships within the industry are striving to get ahead of the regulatory curve.

Our Nation’s Energy Future (ONE Future) began in 2014 when eight companies joined to tackle the    problem. That group now numbers 13 and is on the verge of adding more. The membership list includes Kinder Morgan Inc. (NYSE: KMI), Apache Corp. (NYSE: APA), TransCanada Corp. (NYSE: TRP), Antero Resources (NYSE: AR), Equinor ASA (NYSE: EQNR), BHP Billiton Plc (NYSE: BBL), EQT Corp. (NYSE: EQT) and others.

“We want make sure that natural gas is a competitive fuel and a sustainable fuel so we’ve got to do something about that,” Richard Hyde, executive director of the group, told Hart Energy. “This group of eight companies went to the EPA and said, ‘Hey, we would like to propose to you a voluntary performance- based program. We want to work with you on and get your approval to put it into place.’”

ONE Future’s members represent between 5% and 12% of natural gas throughput, depending on a member’s place in the value chain—production, gathering, processing, transmission (compression stations), storage, pipelines and distribution.

The measurement the group uses to gauge the problem is methane intensity. That is the percentage calculated by the amount of emissions relative to the amount of natural gas produced. ONE Future has a set a goal for its members of 1% in the U.S.

A study released in May by the U.S. Department of Energy’s (DOE) National Energy Technology Laboratory (NETL) and ONE Future showed that the production stage was the source of the highest emissions with an industry average methane intensity of 0.619%. ONE Future’s members in the production segment were able to keep their methane intensity at 0.304%.

Total methane intensity for the industry was 1.617%, compared to 0.672% for companies using ONE Future’s program, said NETL’s study. The comparison in methane intensity in the pipeline segment was

particularly striking, with ONE Future’s program (0.005%) besting the sector as a whole (0.039%).

Clearly, the group is onto something.

“One of the key things of our whole program is by setting a goal of 1%,” Hyde said. “We wanted to publicly make a statement that we’re going to get to 1% so people could see, ‘how are you guys progressing over time?’ We wanted to not only hold ourselves accountable but we are working very closely with the EPA to ensure that they hold us accountable.”

ONE Future employs what Hyde described as a “toolbox,” or collection of technologies that companies can utilize to mitigate methane leaks depending on their place in the value chain and individual circumstances. The group focuses on methane leak reduction in the U.S. but Hyde said all members benefit from the experience and expertise of multinational companies like BHP, Equinor and TransCanada.

ONE Future is not alone. Other organizations like the American Petroleum Institute, American Gas Association and INGAA, as well as the Environmental Defense Fund’s partnership with industry players, are pursuing solutions to the problem.

But while political pressure grows globally to reduce emissions—the U.S. committed to reducing emissions by 26% to 28% from 2005 levels in the Paris climate accord—ONE Future focuses on other aspects. Members of the group are in business to make money, Hyde stressed, and methane leaks are an economic threat.

He described methane concerns as the sides of a triangle: safety, investors and customers. Inside the triangle is the environment. Take care of the surrounding sides and the environmental problem is resolved.

“Safety is obviously something that impacts our employees and the areas that we’re operating in,” he said. “The investor community over the last two to three years has really turned its attention to sustainability, with methane emissions being one subset of that. Investors want to know: what are companies doing

to ensure they’re using their resources—in our case, natural gas—in a sustainable manner. The third is obviously our customers—that’s how we make money.”

Of course, ONE Future is made up of major players in the industry who pursue profits but are also acutely aware of public perception. At a panel discussion at the World Gas Conference, moderator Amy Hemingway of Edelman recalled a conversation she had with a natural gas company executive.

That company was working hard to reduce its emissions, she said, but he indicated to her that his company’s approach was not widespread in the industry. Until that happens, worker safety will be at risk, money will be lost, and investors and customers will grumble.

“In today’s environment it’s a little bit different for industry to have good working relationships with the agencies that regulate them,” Hyde said. “It just so happens in this case, we’re not being regulated but we want to ensure that the regulating agencies are having an oversight on us. At the end of the day, if we don’t have credibility with the general public then I think we’ve missed the mark for a lot of what we want to achieve.”

Joseph Markman can be reached at jmarkman@hartenergy.com or @JHMarkman.

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“Three Amigos” Talk Methane; ONE Future Has a Way Forward

“Three Amigos” Talk Methane; ONE Future Has A Way Forward

July 1, 2016

At the “Three Amigos” summit this week in Ottawa, Canada, President Obama, Canadian Prime Minister Trudeau and Mexican President Peña Nieto announced a coordinated plan to reduce greenhouse gas emissions across the three countries.

As a part of the North American Climate, Clean Energy and Environment Partnership, Mexico will join the U.S. and Canada in a pledge to reduce methane emissions from the oil and gas sector by 40-45% by 2025.  The primary avenue for reducing emissions will be by targeting leaks from oil and gas infrastructure.  In addition to the greenhouse gas emissions reduction, the three leaders also announced that half of North America’s electricity will be generated by clean power sources by 2025.  That figure currently sits at 37%, according to the U.S. State Department.

Reducing methane is good for the environment and good for business—and there is room for improvement along the natural gas value chain.  That’s why ONE Future has advocated for and aspires to reach our ultimate goal of a natural gas delivery system that is 99% (or more) efficient. We’re also investing in new energy infrastructure and advanced technologies to also support better methane data collection.

For these reasons, the three North American leaders’ commitment to reducing methane emissions should be applauded.  However, as this new ICF study shows, it is important to approach methane abatement with an emphasis not only on the areas of the value chain that allow for the greatest reductions, but also where you can get the best bang for your buck.

In short, an abatement strategy should not be one-size-fits-all.  The best approach to lowering methane emissions should be founded on a performance based program that allows for flexibility and for companies to determine where exactly in the supply chain emissions can be most effectively reduced.

By using new data from the ICF study, individual companies can map out the best way forward to reduce emissions, identifying the greatest opportunity for abatement and developing technology to target those areas.  This will ultimately deploy capital in the right areas and lead to the greatest overall reductions in methane.

As the United States, Canada and Mexico further develop plans to cut greenhouse gases, hopefully market realities and available abatement technologies will inform their process for reaching our shared goal of lowering emissions.  Prescriptive regulations are not the answer, but a flexible and responsible pathway forward is.

About ONE Future: ONE Future is a coalition of companies from across the natural gas industry focused on identifying policy and technical solutions that yield continuous improvement in the management of methane emissions associated with the production, processing, transmission and distribution of natural gas.

One-Size-Fits-All Approach to Reduce Methane Emissions is Inefficient, Costly

One-Size-Fits-All Approach to Reduce Methane Emissions is Inefficient, Costly

June 29, 2016

As we highlighted earlier this month, an honest debate on methane emissions is one that should be driven by science, objectivity, and logic in determining the best path forward in our quest to further reduce emissions. Hyperbole, politics and broad-brush statements – that are free from fact or science – must be left at the door if advocates and activists are truly interested, as we are, in reducing methane emissions in a manner that make sense for the environment and for business.

Last week, the Center for American Progress (CAP) released a paper called “Who’s Who of Methane Pollution in the Oil and Gas Production Sector,” which claims that one-size-fits-all blanket regulations on all existing petroleum and natural gas infrastructure are absolutely necessary to achieve methane reduction goals. As the report puts it,

“The best way to curb these emissions is for the EPA to set strong mandatory standards for existing sources in the oil and gas sector in order to complement the new source standards finalized in May 2016.”

This claim, while a rallying call by those who are advocating for the elimination for clean-burning natural gas, is a claim that is strongly contradicted by actual science and field data as concluded in a recently released ICF International studythat was commissioned by ONE Future.

To be clear, ONE Future’s unwavering commitment to achieving a natural gas value chain that is 99 percent efficient will significantly enhance our environment through the efficient deployment of resources that will focus on deploying technologies that will provide the best environmental return on investment.

Using 2012 EPA Greenhouse Gas Inventory emissions data — the latest available at the time — as its baseline and a $3.00/Mcf natural gas price ($2.25/Mcf – 25% royalty and fee payments) that is reflective of current and near-term forecasted prices, ICF International ran its marginal abatement cost (MAC) model and found that 88.3 Bcf of methane could be reduced at a cost of $296 million/year or $3.35/Mcf.

Importantly, despite the best efforts by some, this new ICF report does not attempt to justify dismissing mitigation opportunities due to cost. Instead, the objective was to provide data that will help companies achieve maximum reductions in the most cost-effective manner possible.

In fact, the data from the study will help us reach our goal of achieving an emissions rate of one percent or less of production. It will also complement the our companies’ continued participation in the Natural Gas STAR Methane Challenge Program, a voluntary partnership between industry and the EPA that has already proven, cost-effective, performance-based methane reductions from natural gas operations can be achieved. Since the inception of the STAR program 23 years ago, U.S. companies have eliminated more than 1.2 trillion cubic feet (Tcf) of methane emissions by implementing approximately 150 cost-effective technologies and practices.

We as a coalition are absolutely committed to reaching a methane emissions goal of 1 percent of production or less – and our hope is to do so in the most cost-efficient manner possible, which will benefit all parties involved. This ICF study offers a rational and realistic road map toward achieving that goal.

About ONE Future: ONE Future is a coalition of companies from across the natural gas industry focused on identifying policy and technical solutions that yield continuous improvement in the management of methane emissions associated with the production, processing, transmission and distribution of natural gas.

Sound Independent Research Informs Constructive Methane Dialogue

Sound Independent Research Informs Constructive Methane Dialogue

June 7, 2016

New data and information bring new debate and conversation. After all, that’s the purpose of research and science. So when new research and science enter a particular debate, most rational minds will evaluate this information with an open mind and take the findings into account when making decisions.

Last week, Our Nation’s Energy Future (ONE Future) — a coalition of natural gas companies focused on identifying technical solutions and public policies that help reduce methane emissions – published a report it commissioned from economic consulting firm ICF International. The report found that the cost to reduce methane emissions from natural gas systems was nearly five times greater than previous estimates suggested. Our statement in response to release of the study can be found here.

The report, available here, drew on extensive consultation with ONE Future members, including how various technologies were performing in the field and the actual costs associated with implementing those technologies into members’ methane emissions monitoring programs. The report used the 2012 EPA emissions inventory as a baseline, which was the most recent data set available when the study began over a year ago. Importantly, the report also used a natural gas input price of $3.00/Mcf of gas ($2.25/Mcf – 25% royalty and fee payments), which is in line with current and near-term forecasted gas prices.

With these data in-hand, the experts at ICF International ran their marginal abatement cost (MAC) model and concluded the following:

“The analysis estimates [methane] reductions for each segment of the natural gas industry. The MAC analysis identified reductions totaling 88.3 Bcf/year of methane at a total annualized cost of $296 million or $3.35/Mcf of methane reduced for all segments except the distribution segment. An additional 12.3 Bcf of reductions were projected for the application of reduced emission completions for gas wells with hydraulic fracturing. This was not required in 2012 but is now legally required, and was therefore included as a reduction from the baseline but not as part of the MAC analysis.  This brings the total industry?wide methane reduction to 109.5 Bcf from the 2012 baseline emissions.”

To be clear, this study was commissioned by ONE Future to determine realistic (and as close to real as possible) cost estimates for various methane abatement technologies and the amount of reductions each one of these technologies would achieve.

Unfortunately, some are twisting and turning the findings to push a prescribed agenda; namely, a defense of the status quo regulations that do not account for the elements incorporated in this report. To be clear, this new report never makes the claim that methane reductions shouldn’t be achieved because of cost. Simply put, our goal was to find out where we could achieve the best bang for the buck in reducing methane; anything to the contrary is a blatant misrepresentation of the report’s findings and ONE Future’s position.

We hope that this study will provide a road map for companies to consult when deploying capital in the most cost-effective methods to achieve the greatest possible reduction in methane emissions.

Furthermore, this analysis provides new and additional data to inform our companies’ involvement – and that of the entire industry – in the Natural Gas STAR Methane Challenge Program – a flexible, voluntary partnership between U.S. EPA and the and natural gas industry that focuses on achieving cost-effective methane emission reductions from natural gas operations. Since the inception of the STAR program 23 years ago, U.S. companies have eliminated more than 1.2 trillion cubic feet (Tcf) of methane emissions by implementing approximately 150 cost-effective technologies and practices.

We as a coalition are absolutely committed to reaching a methane emissions goal of 1 percent of production or less – and our hope is to do so in the most cost-efficient manner possible. What this new ICF study shows is that an abatement strategy should not be a one-size-fits-all strategy, but rather be founded on a performance based programthrough which companies have the flexibility to meet the end goals and transparently demonstrate their compliance.

We are certain that this piece of independent research will not be the last analysis on methane emissions abatement technologies and costs. But based on the current body of research in this space, it’s certainly the most accurate to-date. And as technologies evolve even further, we would expect costs to come down and methane emissions to be reduced even more. After all, that’s the purpose of research and science – things evolve, and one’s opinion should too.

About ONE Future: ONE Future is a coalition of companies from across the natural gas industry focused on identifying policy and technical solutions that yield continuous improvement in the management of methane emissions associated with the production, processing, transmission and distribution of natural gas.

Study – ICF Analysis of Methane Emission Reduction Potential from Nat Gas Systems

Study – ICF Analysis of Methane Emission Reduction Potential from Nat Gas Systems

June 2, 2016

Our Nation’s Energy Future Coalition (ONE Future)1 commissioned ICF to conduct this analysis of the marginal abatement cost (MAC) of various methane emission abatement technologies and work practices for the natural gas industry. The goal of this MAC analysis is threefold: (1) to identify the emission sources that provide the greatest opportunity for methane emission reduction from the natural gas system, (2) to develop a comprehensive listing of known emission abatement technologies for each of the identified emission sources, and (3) to calculate the cost of deploying each emission abatement technology and to develop a MAC curve for these emission reductions. The findings of this report will be utilized by ONE Future to develop segment-specific methane emission reduction goals that, when combined, will achieve a collective 1% (or less) emission target in the most cost?effective manner. This report will also assist each ONE Future member to customize its abatement strategy to fit its particular emission profile.

This analysis is based on a MAC curve model developed by ICF for the Environmental Defense Fund (EDF) in 2014. The current study incorporates more recent information on emissions and equipment costs and modified assumptions provided by the One Future participants. Appendix A summarizes and compares the key assumptions and results for the two studies. The study utilized the following approach:

  • The baseline for methane emissions from the natural gas sector was established as the U.S. EPA
    Inventory of Greenhouse Gas Emissions for 2012 to match the baseline year employed in the U.S.
    methane emissions reduction goals.2
  • A review of existing literature and additional analysis was conducted to identify the largest emission reduction opportunities; a cost-benefit estimate for each of the mitigation technologies was calculated.
  • Interviews with One Future members, industry, technology innovators, and equipment vendors
    were conducted with a specific focus on identifying additional mitigation options and characterizing the cost and performance of the options.
  • Information from the analysis was used to develop MAC curves for the methane reduction
    opportunities.

The analysis estimates reductions for each segment of the natural gas industry. The MAC analysis identified reductions totaling 88.3 Bcf/year of methane at a total annualized cost of $296 million or $3.35/Mcf of methane reduced for all segments except the distribution segment. The reductions for the distribution segment were calculated separately, and total 8.9 Bcf. An additional 12.3 Bcf of reductions were projected for the application of reduced emission completions for gas wells with hydraulic fracturing. This was not required in 2012 but is now legally required, and was therefore included as a reduction from the baseline but not as part of the MAC analysis. This brings the total industry-wide methane reduction to 109.5 Bcf from the 2012 baseline emissions.

1 ONE Future is a coalition of companies that aims to achieve an average rate of methane emissions across the entire natural gas value chain that is one percent or less of total natural gas production.

2 This analysis was completed prior to the updates to the methodologies incorporated into the U.S. Greenhouse Gas Inventory
(GHGI) on April, 15, 2016.

Click here to view the full study

ONE Future Statement on New ICF Study

ONE Future Statement on New ICF Study

June 2, 2016

New ICF International Study: Methane Abatement Costs Higher Than Previously Estimated
ONE Future Coalition committed to reducing methane emissions; welcomes updated data on abatement costs

Washington, D.C. – A new independent assessment of methane abatement costs by ICF International concluded that the cost to reduce methane emissions from natural gas systems is $3.35/Mcf of methane reduced, nearly five times greater than previous estimates suggest.

This analysis, commissioned by ONE Future – a coalition of natural gas companies focused on reducing methane emissions – is based on a MAC curve model developed by ICF for the Environmental Defense Fund (EDF) study in 2014. ICF, in this new analysis, evaluates the economics of methane recovery at a natural gas price of $3.00/Mcf. It also uses data from EPA’s 2012 emissions inventory as well as updated cost and emission reduction data that was based on direct experience of ONE Future member companies.

“This new study provides cost estimates of methane abatement technologies that are more consistent with current market realities,” said ONE Future interim executive director Richard Hyde. “These findings will assist ONE Future member companies in our shared efforts to reduce methane emissions to less than one percent of total natural gas production.”

Importantly, this analysis updates the list of known emission abatement technologies and provides revised costs estimates for each one. It also provides estimates of the total methane emission abatement potential associated with the various segments of the natural gas industry. At its core, the study incorporates new information on the cost of methane control technologies and practices and the ability of industry to monetize recovered gas.

ICF updates costs for mitigation technologies by taking into account data provided by ONE Future members. The increased cost of methane reduction is higher than previously estimated largely due to higher assumed costs for leak detection and repair (LDAR) and revised assumptions regarding the ability of midstream segments to monetize the value of recovered gas.

Concluded Hyde, “This in-depth analysis – which incorporated field data and extensive consultation with natural gas producers, midstream operators and distribution companies – confirms ONE Future’s position that combining a performance target with a flexible pathway towards meeting the shared goal of further reducing emissions, gives companies the right tools to meet methane emissions reduction targets.”

About ONE Future. ONE Future is a coalition of companies from across the natural gas industry focused on identifying policy and technical solutions that yield continuous improvement in the management of methane emissions associated with the production, processing, transmission and distribution of natural gas. Formed in 2014, ONE Future member companies aspire to continuously improve the efficiency of the natural gas supply chain. By promoting smarter policy approaches and working to identify solutions across every sector of the industry, we can deliver better results to our customers, increase value to our shareholders, and improve our environment. Today our focus is on improving the management of methane emissions from the natural gas wellhead to the burner tip.

ONE Future Comments On EPA’s Methane Challenge Proposal

ONE Future Comments On EPA’s Methane Challenge Proposal

November 17, 2015

ONE Future submitted detailed comments and recommendations to the EPA regarding the agency’s Methane Challenge proposal. EPA’s proposed Methane Challenge framework establishes the industry-led ONE Future coalition as an official “commitment option” — potentially launching an innovative public-private partnership focused exclusively on reducing emissions and improving the efficiency of the US natural gas sector.

Tom Michels, the coalition’s Executive Director, stated, “Although we have suggested numerous recommendations to EPA, ONE Future strongly supports what EPA has proposed with the Methane Challenge, We’d like to see EPA adopt this type of collaborative approach as a template in addressing future environmental policy challenges.”

Click here to read ONE Future’s comments on EPA’s Methane Challenge proposal.

EPA Releases Additional Info On Methane Challenge Initiative

EPA Releases Additional Info On Methane Challenge Initiative

October 20, 2015

Today the EPA released additional technical details about their new “Methane Challenge” initiative, a voluntary public-private partnership aimed at improving the management of methane emissions across the natural gas value chain.(Note, ONE Future is an independent industry-led nonprofit, but earlier this year EPA proposed that ONE Future be recognized as a key partner program of Methane Challenge.)

EPA’s announcement today provides supplemental technical information related to emissions sources and emission abatement option supported by Methane Challenge, as well as some of the data elements that companies enrolled in Methane Challenge could report to demonstrate their progress in managing methane emissions.

Click here to check out the EPA’s Methane Challenge homepage.

Pittsburgh Post-Gazette: EPA Holds Public Forum On Proposed Methane Rules

Pittsburgh Post-Gazette: EPA Holds Public Forum On Proposed Methane Rules

September 29, 2015

“More than 150 people representing the gas drilling industry, environmental organizations, faith and community groups or just themselves signed up to speak today in Downtown Pittsburgh at the third and final U.S. Environmental Protection Agency hearing on regulations proposed to reduce oil and gas industry emissions of methane, a potent greenhouse gas…”

Check out the full article in the Pittsburgh Post-Gazette.