Natural Gas Certification Question: Which Standard Should be Standard?

HOUSTON—Proponents of certifying natural gas are forced to walk a political tightrope, fending off accusations from the left of greenwashing, and from the right of burdening the oil and gas industry with more regulations.

For the industry, the payoff lies in showing how standardized measurements of methane emissions position the U.S. to lead in the energy transition, experts said at Hart Energy’s recent Energy ESG Conference.

“I think all of it moves towards just creating a situation in which the gas industry can actually be part of the climate solution,” said Christopher Treanor, Washington-based counsel at Akin Gump Strauss Hauer & Feld LLP. “I don’t want to be Pollyannaish about it, but I do see it as a long-term positive in order to help convince policymakers, not just in the United States but abroad, that U.S. natural gas is truly as clean as we claim it to be.”

How to measure

But in the absence of a universal standard to quantify emissions and differentiate natural gas based on methane intensity, who decides which gas gets the “certified” label? Short answer: the marketplace.

“We know that methane is one of these special cases, but certification is really the pairing of the standards and the performance of methane abatement as it is being perceived by the marketplace,” said Lara Owens, director of science and technology at MiQ, a company that certifies natural gas based on its methane intensity. “So, really, certification is saying how leaky is your gas and what am I going to pay for it?” 

Settling on how to measure methane emissions can be tricky. There are plenty of good technologies, Owens said, but each company or organization is going to have its own opinion of which method works best.

MiQ uses a three-pillar system for judging the emissions performance of produced natural gas:

• Monitoring;
• Abatement potential; and 
• Actual methane emissions.

Owens added that she realized that many companies already use measurement systems developed by Oil & Gas Methane Partnership (OGMP) and Project Veritas, among others. That data can be incorporated into the MiQ protocol and bring together performance, abatement potential and monitoring, as well as measuring emissions.

Over a cliff

There are two races that U.S. natural gas producers need to be running, said Will Jordan, executive vice president and general counsel for EQT Corp., the nation’s largest gas producer.

“We need to be pushing our emissions down as much as we can, but we cannot let that get in the way of growing our production,” he said.

Production growth has been stymied by an inability to build pipelines to increase takeaway from Appalachian gas fields, Jordan said. The resulting scarcity of gas provided leverage to Russian President Vladimir Putin when he decided to invade Ukraine earlier this year. Cutting off natural gas supplies to Europe has led to a shortage of gas to make ammonia used in the production of fertilizer, driving the world to the brink of a global food crisis.

“So, it’s taken a while for us to hit the cliff but we’ve hit it and it’s going to take us a good long while for us to reverse course,” Jordan said.

But selling gas that is lower in emissions is a critical component of the course correction.

“Look, I think that anything that puts scrutiny on emissions is fundamentally a good thing for the United States,” he said. “It’s a good thing for Appalachia, it’s a good thing for Haynesville.”

The reason is that the cleaner the gas produced in the U.S., the bigger the advantage U.S. producers will have in the global marketplace. That’s central to MiQ’s strategy, too.

“We really invested in a market-based solution because that’s the only way we can export what we’re doing right here,” Owens said. “So, we’re talking every day about how is that we can improve things in Colorado, how is it that we can improve things inside the United States? Well, right now, we’re sort of dialing it down, but the big opportunity is how American gas is going to, ultimately, competitively differentiate itself against other sources.”

Keeping it credible

Central to the effort is credibility of the process. The last thing Owens wants is for certification to be lumped with carbon offsets, an effort plagued by improper usage and accusations of greenwashing.

“I don’t want to be Pollyannaish about it, but I do see it as a long-term positive in order to help convince policymakers, not just in the United States but abroad, that U.S. natural gas is truly as clean as we claim it to be.”—Christopher Treanor, Akin Gump Strauss Hauer & Feld LLP

To resolve the credibility issue, MiQ pursues standards that are transparent, robust and tested. Independent auditors are critical, as are registries to ensure there is no double counting of certificates. And no cherry-picking.

“Unless we’re looking at an entire basin’s worth of operations or a field’s worth of operations, we’re going to put ourselves at exposure of being scrutinized,” she said. If operations in the entire field or basin do not hold up when organizations like OGMP and the Environmental Defense Fund take a look, all of a company’s assertions about its emissions are in doubt.

Each segment of the supply chain has its own standard for measuring emissions, Owens said, because each segment emits differently. Companies need to choose the technology that works best for them, but recognize that not all certifications are created equal. Choosing certification with lower standards now can backfire in the future if regulators adopt more stringent rules.

At the moment, government movement toward standardization appears unlikely.

“They’re certainly paying attention, but I think they are staying out of it for now, as the market sort of develops,” Treanor said. “Many of us want to see that standard right now so we know what it is and it’s easy for us to make calculations and it’s easier for investors to know exactly what they’re getting but the reality is that competition needs to play out and it’s probably going to take some time.”

And letting the market do its thing and figure out certification standards on its own will ultimately work in everyone’s favor, he said. 

“If Washington gets overly involved right now,” Treanor said, “it would only be bad.”