On A Mission To Mitigate: Industry Vs. Methane Leaks

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.