Upgrading Rules and Standards to Bolster the Energy Transition

Jack Belcher is a principal at Cornerstone Government Affairs, where he focuses on regulatory affairs, risk management and ESG matters within the energy and transportation sectors.

The energy transition has brought with it a slew of new activities, practices and technologies by the energy industry in a race to decarbonize. 

In recent months, there have been numerous corporate announcements about new initiatives, funding sources and projects focused on areas including carbon capture and storage (CCS), hydrogen fuel and certified lower carbon intensity natural gas. 

At the same time, the guidance and programs for the grants, loans and tax credits outlined in the ~$740 billion Inflation Reduction Act (IRA) are being developed and implemented by federal agencies. Amid all the activity, state and federal governments are currently determining the roles they will play in managing and regulating the enormous changes resulting from the energy transition. 

The market for and availability of certified natural gas is growing rapidly as U.S. producers utilize the three major certifiers—Equitable Origin, MiQ and Project Canary—to certify volumes to meet growing global demand for a cleaner, lower-carbon natural gas. The cutoff of Russian gas supplies to Europe accelerated this trend. With markets—especially in Europe—seeking a more consistent minimum standard for categorizing clean natural gas, the U.S. Department of Energy (DOE) has begun engaging with the oil and gas industry and gas-consuming nations to discuss an international standard for ensuring the performance of certified “clean” natural gas. 

In fact, according to a recent story in Politico, DOE is planning to have a standard ready to announce during the United National Climate Change Conference (COP28) in Dubai later this year. According to Assistant Secretary for Fossil Energy and Carbon Management Brad Crabtree, the DOE is working with stakeholders to develop an agreement on a measurement and verification framework to encourage methane and CO₂ emissions reductions throughout the natural gas value chain. 

Relatedly, MiQ recently launched a certification program that provides a full life-cycle calculation of the greenhouse-gas emissions (GHG) associated with the LNG supply chain. It will track GHG emissions from production all the way to regasification, allowing importers to compare LNG exporters “using one common framework,” according to MiQ. Additionally, Pittsburgh-based gas producer EQT announced it is partnering with Context Labs to bring verified lower carbon intensity natural gas products and carbon credits to market. The partnership will apply Context Labs’ distributed ledger technology, advanced climate data and analytics, machine learning and AI-capabilities to EQT’s gas production to certify and register the carbon intensity of its operations.
 
U.S. Treasury and Internal Revenue Service officials are currently working to establish rules for applying the massive IRA tax credits to clean hydrogen production; states, universities and companies have given their final pitches to the DOE in hopes of being chosen to participate in its program offering $8 billion in funding for at least six regional hydrogen hubs by 2028. The hubs will leverage local resources for clean hydrogen production, storage, transport and distribution infrastructure to be used in applications such as fuel cell electric vehicles, industrial processes and power generation. Earlier this year, 33 of 79 total hub applicants were invited to move forward in the application process, and the DOE expects to announce the chosen hub recipients early in the fourth quarter.
 
With several projects announced and dozens more being contemplated, both federal and state governments are also working to establish regulatory guidelines and incentives for carbon capture and storage projects. The IRA provides $3.7 billion for construction of four direct air capture CCS facilities and includes expanded tax credits for CCS. There are also ongoing debates in state legislatures, including Louisiana and Texas, over the regulation of CCS.
 
The Texas Legislature is deliberating over which regulatory agency should exercise jurisdiction over CCS, how to determine ownership of pore space and the contours of liability related to CCS operations. These are themes that are common in deliberations underway in other states.
     
Crafting laws and regulations is never easy. It involves long debates and compromises. The regulations and laws currently being developed to manage the energy transition address topics that are quite complex. It is important that our policymakers take the time to address these complex issues appropriately, get the proper technical guidance from subject matter experts on these issues and provide the energy industry with laws and regulations that are succinct, clear, fit for purpose and achievable. The best regulations are ones that emerge from industry best practices, things we have already applied in the field. Let’s hope that we get the proper guidance from our leaders to help us successfully guide the energy transition.