As these companies have themselves recognized, the role of natural gas in a world that can—and must—decarbonize depends on minimizing harmful emissions of methane from across oil and gas production and the natural gas value chain. But a recent comprehensive study involving dozens of leading academics and companies around the country found that U.S. methane emissions from industry are 60 percent higher than prior estimates—enough to double the climate impact of natural gas.
For years, conversations at major oil and gas industry conferences focused on one thing: the shale revolution. Excitement about the surge in economical new supply of unconventionally produced oil and gas was palpable, as panelists spoke of the potential for shale to transform everything from the geopolitics of American energy supply to the price of hydrocarbons. With such an unexpected and seismic change, a supply side story carried the day, with a focus on “below ground” drivers of energy abundance.
But today, the shale revolution is simply the new normal and the conversation has changed. “Above ground” factors like increasing competition from renewables, greenhouse gas emissions, and license to operate will affect demand for natural gas for years. How industry confronts such challenges – both in the United States and internationally – will have a lot to do with industry’s longevity in putting resources to productive use in a changing world demanding cleaner energy
At last week’s World Gas Conference in Washington, DC, difficult questions swirled about whether industry has done enough to earn societal trust that natural gas has a constructive role to play in the transition to a low carbon economy. The biggest buzz of all surrounded one key issue: methane emissions, a core strategic challenge for the oil and gas industry.
I remember from experience that methane began as a niche issue years ago, mentioned by engineering and science teams, not CEOs. World Gas Conference 2018 left no doubt that those days are over, and that tackling methane must become part of business as usual. Here are four key takeaways. Read more
The simple answer is this. Environmental Defense Fund (EDF) approaches challenges pragmatically. If we want to rid the planet of harmful climate pollution, our efforts must include working with the industries that can make the biggest difference.
That means I spend a lot of my time working with leaders from the oil and gas industry. While we don’t always agree, we forge solutions wherever we can.
- Target setting
This year, 10 leading companies through the Oil and Gas Climate Initiative supported the ambition of achieving “near zero” methane emissions, and committed to set quantitative methane targets in 2018. This was an important and welcome moment as CEOs upped their methane pledge. 2018 will be a key year for follow through in establishing and announcing those targets. We will look for targets that are ambitious, innovation-forcing, and linked to credible plans for verification. We will also look that this action addresses emissions from both oil and gas production, as the International Energy Agency’s data shows that more methane emissions comes from oil production than from gas production.
The degree to which the oil and gas industry can be trusted to play a constructive role in a low carbon future depends in no small measure on whether and how it reduces climate pollution today. That’s why company insiders, investors, and policy makers should take careful note of the sensible and innovative commitments announced by XTO Energy, the ExxonMobil subsidiary that leads the United States in natural gas production.
The industry’s many outside stakeholders both in the U.S. and around the world are increasingly calling for emission reductions and greater commitment to cleaner production. Companies that heed those calls, and advance new technologies, will be much better positioned to answer society's demands for responsibility. Read more
Three years ago, Environmental Defense Fund (EDF) united with oil and gas industry leaders including Shell and Statoil to launch the Methane Detectors Challenge – a collaborative effort to catalyze the development and deployment of stationary, continuous methane monitors. With industry pilot projects now cropping up from Texas to Alberta, continuous methane monitoring on natural gas sites is on a pathway to become one of the core tools in the monitoring toolkit.
And that’s a good thing – 24/7 monitoring is the gold standard for emissions control, opening a new frontier in site-level insight. It will enable real time identification and repair of natural gas waste that pollutes the atmosphere, and the industry’s own reputation.
Now, another exciting area of innovation is emerging, as entrepreneurs, technologists, and academics pursue mobile approaches to monitor leaks. Whether by plane, helicopter, drone or truck, mobile monitoring offers the promise of surveying highly dispersed industrial facilities – including smaller and older ones – quickly and effectively. With an estimated one million well pads in the United States alone, the speed and coverage of monitoring matter.
Mobile methane monitoring for some sites could be a perfect complement to continuous monitoring for others, offering a 1-2 punch solution to comprehensively monitor and address emissions across a highly variable industry, with fit-for-purpose tools.
A new collaborative challenge to reduce methane
That’s why we are so pleased to support Stanford University’s Natural Gas Initiative by announcing the Stanford/EDF Mobile Monitoring Challenge (MMC). The MMC is the latest collaborative innovation project from EDF, partnering with Dr. Adam Brandt of Stanford’s School of Earth, Energy & Environmental Sciences, the principal investigator for MMC and one of the world’s leading scientists studying oil and gas methane emissions.
The aim of the Mobile Monitoring Challenge is to rigorously test and compare the most promising new mobile technologies and approaches to quickly detect and quantify methane emissions – with extra interest in commercially scalable options.
Calling all methane monitoring entrepreneurs
Today begins a 45-day application period for technologists around the world who wish to participate in 15 days of field trials. Stanford and EDF, aided by industry and other expert advisors, will pick the most promising submissions this fall, and Professor Brandt’s team will oversee field testing with controlled releases of methane this winter and spring, culminating in a Stanford paper documenting results for the peer-review process.
Candidates for the Mobile Monitoring Challenge should have methane monitoring technology that:
- Is field ready
- Can be deployed on a mobile platform (e.g. drone, plane, car, truck, etc.)
- Is cost-effective and can quickly detect leaks at multiple sites
- Provides both detection and quantification
See the Stanford/EDF application process for full details.
With subsequent real world testing and demonstration, the leading mobile monitoring approaches coming out of this initiative may even support regulatory compliance, propelling greater emission reductions at even less cost – the classic win/win.
Three years ago, EDF was encouraged to receive dozens of technology applications from around the world for the Methane Detectors Challenge. With the ongoing sensor revolution coupled with the surge in methane emissions interest across North America and the world, we are even more optimistic today about what the future holds.
That’s because at EDF, we know that bringing the right stakeholders together to harness diverse thinking and innovative technologies is the next wave of environmental progress.
Let the challenge begin!
Follow Ben on Twitter, @RatnerBen
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This post originally appeared on Forbes.
Recently, at an oil and gas industry event co-hosted by Energy Dialogues and Shell in Houston, Ben Ratner, a Director at Environmental Defense Fund, met up with Michael Maher, presently with Rice University’s Baker Institute for Public Policy and a former longtime economist with ExxonMobil, to discuss the future of the natural gas industry. Specifically, they talked about the growing divide between those—in government and in the industry—who want less environmental regulation, particularly over the issue of methane emissions, and those who see sensible regulation as the best way for the industry to assure its future as offering a cleaner alternative to other, dirtier, fossil fuels.
Since Michael and Ben met in Houston, the Trump Administration announced the U.S. departure from the Paris climate agreement and postponements and potential weakening of methane emission rules from the Environmental Protection Agency and Bureau of Land Management. These new developments put the industry divide into sharper focus.
States could now step up to address issues that the federal government was poised to take the lead on under rules promulgated by President Obama toward the end of his term. But will states act without industry prodding or at least, support for action? And will companies most worried about license to operate intervene against delays, weakening, or even elimination of nationwide standards? Mike and Ben discuss below.
Ben: As a former oil and gas industry employee, how do you think the industry should respond to the regulatory rollbacks of the Trump administration?
Michael: This administration is moving rapidly away from a federal role in climate change policies. The question for the oil and gas industry is whether to sit back and coast on the federal failure to act or to work with states to address greenhouse emissions. Coasting may look like a cost saver for the near term, but the pendulum will eventually swing back, and a reversal of Trump’s policies is a real prospect down the road. However, if enough states—with industry support—were to effectively address methane emissions it could provide guidance for federal action down the road and protect the industry against the reputational damage of being seen to have resisted sound environmental regulation.
Michael: In the current political climate, what do you see as the role of leading companies?
Ben: The great irony here is that while the Trump attacks on environmental standards are intended to help industry by reducing costs in the short term, they may end up inflicting much greater long-term damage. A classic case of “short term gain, long term pain.”
Energy consumers, institutional investors and citizens want cleaner energy, and scrapping rules that help the industry clean up may ultimately endanger the industry’s social license to operate and make it more difficult to do business. So we will be looking hard to see which companies step forward to slow down the deregulatory torrent that is tarnishing the industry’s reputation just as demand for cleaner energy is lifting off.
In recent days, Shell and Exxon reportedly stated that they are complying with EPA’s contested methane rules, but other companies have stayed silent. Companies like ConocoPhillips and BP voiced their support for the Paris international climate agreement. With the U.S. now withdrawing from the Paris accord, will companies like these make good on addressing climate change by publicly supporting policies aimed at reducing methane emissions? We haven’t seen true industry support at the federal regulatory level, at least not yet.
At the same time, regardless of what happens in Washington, states have a golden opportunity to develop their own methane policies. In Colorado, for example, companies like Noble Energy and Anadarko worked with EDF and the state to negotiate methane and air pollution standards that work for business and the environment.
Industry played a vital role in Colorado’s success, and there will be more opportunities for industry leaders to participate in regulatory development in other states.
Ben: Are there business and reputational impacts of failing to address methane emissions?
Michael: Natural gas has historically competed with other sellers with other fuels almost totally on price. But customers and officials are increasingly looking at energy options based on environmental benefits and not just price. There is a robust debate in the Northeast, for example, about how to move forward in decarbonizing their electric power system and it is not focused solely on the costs of alternatives.
In this regard, it is in the interest of the natural gas industry to be able to promote natural gas as a much cleaner alternative to coal. But methane and associated emissions from natural gas drilling operations cloud that cleaner-than-coal claim and plays into the hands of those supporting a more rapid shift to renewables and who argue for “keeping it in the ground.”
Michael: How does EDF view methane control as part of a company’s social responsibility?
Ben: How a company manages its natural gas leaks tells you a great deal about how responsible it is, because leaks cause climate damage and can harm people’s health—especially among the most vulnerable, like children and the elderly. Also, since methane is a commercial product, if a company doesn’t know or care how much of its own product is going into thin air, that’s not a good sign.
Southwestern Energy is one example of a leader that sets a methane target, conveys to its people the value of methane management, and implements leading practices in the field. Another is Statoil, which is working with EDF and an entrepreneur to pioneer efficient new automated methane monitoring technology. These kinds of efforts can deliver financial value by recouping lost product, and demonstrating to investors, communities and other key stakeholders their lived commitment to responsible corporate behavior.
Ben: How do you see the industry tackling the methane problem?
Michael: Farsighted, well operated companies are already taking action to cut emissions, but sometimes the policy advocacy lags behind. There needs to be leadership on this issue from major players—not just singly but as a coalition urging federal agencies to retain or improve rules, rather than delay or weaken them. This coalition should also engage states in developing sound regulation of new drilling and older wells.
Some in industry are already pushing ahead with testing new technology that would reduce the cost of controlling emissions. That effort should continue, but voluntary action of this sort is not a replacement for regulations that apply across the entire industry. Nor will piecemeal voluntary efforts of a few overcome the stigma of hundreds of other companies abstaining from action to reduce their methane emissions.
Michael Maher is a senior program advisor at the Center for Energy Studies at Rice University’s Baker Institute for Public Policy
Ben Ratner is a Director with EDF+Business at Environmental Defense Fund
In the same week Apple raised $1 billion through green bonds to invest in clean energy, and Amazon put solar panels on a million square foot processing facility, the Trump administration – at the urging of the worst elements in the oil and gas industry –proposed a two-year delay of sensible rules that would limit emissions of methane and other air pollutants. While a federal court since struck down a previous 90-day delay as unlawful, the two-year delay is still subject to public comment, and many expect the administration’s attacks on methane safeguards to continue through other means.
Natural gas, which is mostly methane, has been put forward as a cleaner alternative to other fossil fuels and as an energy resource that can play a key role in the transition to a lower-carbon future. But now more than ever, that proposition is now called into serious question.
How will natural gas compete in a changing world?
Every year, oil and gas operations around the country emit some 8-10 million metric tons of methane into the air. Methane is a highly potent greenhouse gas, responsible for about a quarter of the climate warming we’re experiencing today – and those emissions come mingled with a host of other smog-forming and carcinogenic pollutants.
There are cost-effective, proven ways to reduce these emissions, and leading companies are already implementing them. The problem is, many companies refuse to address the problem on their own. And now they’re looking to the Trump administration for a free pass to pollute.
When trade associations like the American Petroleum Institute attack cost-effective policies that protect public health and the climate, it sends a signal that the natural gas industry will do everything it can to maximize short-term profits – even at the risk of damaging the reputation of the industry in the eyes of the public and jeopardizing its ability to operate over the long term.
The question is: In an increasingly carbon constrained world, what is the natural gas industry’s plan for the future?
We’re not arguing that gas is at risk of going away tomorrow. The United States leads the world in natural gas production, as new technologies and processes have unlocked massive, cheap reserves. But make no mistake, the transition to cleaner energy in the U.S. and across the globe is irreversible and accelerating. In this context, fighting reasonable and necessary emissions rules only magnifies risk for the natural gas industry and its investors. It’s a head-in-the-sand approach that ignores the realities of what consumers, communities and markets demand.
Capital markets shifting to cleaner companies and forms of energy
The Trump administration’s recent moves come at a time when environmental concerns informing investment decisions are reaching record highs. For example, investors with $10 trillion in assets under management have committed to the Montreal Carbon Pledge to reduce the carbon footprint of their portfolios, with an eye towards portfolio de-carbonization in the long run.
As part of the shift to assets in lower emitting companies and industries, investors are demanding better carbon and methane disclosure as well as proactive environmental management. The recent watershed Exxon vote, in which 62% of investors (including industry titans like BlackRock and Vanguard) demanded better climate risk disclosure from Exxon management, showed that carbon risk considerations have hit the mainstream.
Increasingly, investors see methane simply as a form of carbon risk in need of management, not neglect. And methane waste can be cost-effectively managed – as proven in states like Colorado where production has continued apace even as strict methane rules have come on the books.
On top of investors’ efforts to shift portfolios towards cleaner companies, the divestment movement also continues to grow, driven by a range of environmental risks of owning fossil fuel stocks. Just recently mainstream investor CalSTRS divested from coal. Going forward, increasing numbers of investors will look carefully at the environmental record of oil and natural gas companies in determining their comfort level in continuing to invest.
Some companies lead but no substitute for commonsense rules
Companies like Southwestern Energy, Noble, Shell and others have led on methane emissions by setting methane targets, supporting state-based regulations, and working with the Oil and Gas Methane Partnership to disclose methane emissions. Their efforts certainly deserve recognition, and are supported by some investors who factor strong methane management into investment decision.
Still, voluntary actions by the few are no substitute for rules and oversight that require responsible operations by the thousands of oil and gas companies operating in the United States. Some of these companies simply lack a commitment to sustainability and to operating over the long-term, and will not rein in emissions unless they are required to do so by law.
Methane safeguards serve the long-term interests of industry and investors
As the scientific reality of climate change and consumer demand steer the world toward a cleaner energy future, will attacks on environmental protections inflict lasting damage on the oil and gas industry? Only time will tell. It’s likely, however, that if the loudest industry voices continue to oppose rules that could guide it toward a cleaner future, the industry as a whole will suffer. Unfortunately, that will include the more forward-leaning companies, which will be dragged down by their intransigent peers. This outcome will become all the more likely thanks to the Trump administration’s erosion of environmental safeguards that are fundamental to responsible development.
It’s time for oil and gas operators and mainstream investors with a long-term view to take a look at what rules and regulations are needed to rein in methane emissions in their industry. And they also need decide if they want to align themselves with an administration whose policies may be unwittingly handicapping the very industry it attempts to serve.
Last November, on the same day the Paris climate agreement took effect, 10 of the world’s largest oil and gas companies, including BG Group, BP, Eni, Pemex, Reliance Industries, Repsol, Saudi Aramco, Shell, Statoil and Total, announced a billion-dollar investment in climate solutions. Together, the member-companies of the Oil and Gas Climate Initiative (OGCI) produce 20 percent of the world’s oil and gas and operate in 55 countries.
Their commitment was the beginning sign of a growing and public recognition by the oil and gas industry that tomorrow’s low carbon energy transformation has become today’s new energy imperative.
Right now, the biggest, most pressing climate item for the oil and gas industry is methane. Importantly, OGCI’s announcement included a global focus on reducing methane, a powerful greenhouse gas. Far more potent than carbon dioxide over a 20-year timespan, methane is responsible for about a quarter of the warming we feel today.
Many expect OGCI to direct hundreds of millions of its billion-dollar pledge into addressing methane. Beyond the climate benefits, it’s a smart business investment. The International Energy Agency has said, “the potential for natural gas to play a credible role in the transition to a decarbonized energy system fundamentally depends on minimizing these emissions.” Simply put, methane is an existential threat for an industry and its long term investors banking on natural gas to aid the transition to a lower-carbon energy economy.
Potential is high for OGCI’s methane endeavor to catalyze important breakthroughs. With sets of OGCI members holding joint stakes in nearly 250 natural gas projects worldwide, there is opportunity to catalyze and spread methane emission reductions throughout the whole industry. We stand ready to help OGCI develop innovative solutions and offer the following suggestions as it begins its methane work.
Data Drives Success
Data alone won’t solve the methane challenge. But strong and credible data are essential. In the United States, vast scientific initiatives have greatly improved our understanding of methane leaks, releases and total emissions from oil and gas activity. This scientific understanding helps companies identify reduction opportunities and regulators develop sound, data-based regulations.
Globally, however, methane measurement is much less mature. Filling the gaps to better inform how companies and countries can address this problem in other parts of the world is important, while companies continue to pursue mitigation opportunities. As a future founding member of the UN’s Oil and Gas Methane Science Studies partnership, OGCI is positioned to bolster reliable and transparent methane science worldwide.
Innovation Requires Collaboration
Some of the innovation required to solve the methane challenge will come from collaboration within and among the OGCI companies. But not all of it. Around the world, there are entrepreneurs, scientists and investors that are already tackling methane. In our experience with the Methane Detectors Challenge, we learned that innovation requires early and ongoing collaboration across technology and energy sector lines. Without it, entrepreneurs don’t know what the market needs or wants and energy companies don’t know what technologists can deliver.
Today, there are gaps of information, culture, language and understanding between technology entrepreneurs and the energy companies they are trying to serve. Closing these gaps by supporting technology innovation is a prime opportunity for an industry group like OGCI to support, and OGCI is positioned to do this now that it has set up a smaller investment vehicle with the license to be nimble.
Focus on Prevention and Detection
Preventing methane leaks and finding them quickly are the two most important methane opportunities.
Every leak that is prevented is a leak that doesn’t need to be repaired. Innovation in design, technologies and strategies that prevent emissions at specific and known sources of equipment should be top of mind for OGCI. For example, aerial measurement studies have shown that tanks are significant emission sources, some of which are not properly controlled. Routine methane releases from inefficient or malfunctioning valves are also believed to be a significant source.
An undetected methane leak can leak indefinitely. It’s one reason why periodic detection is so important, and efficient airborne sweeps for large leaks should be investigated. But while routine checks are better than none, they can still allow leaks to persist for months at a time. In the United States alone, studies have shown that 10 percent of leaks are responsible for 80 percent of emissions. Fortunately, next-generation detection technologies are being developed to catch large leaks with the speed we’d expect in the digital age.
Statoil, a Norwegian-based international oil and gas company and OGCI member, is pioneering continuous methane emissions monitoring at a well pad in Texas, and a leading natural gas utility is doing the same in California. These are promising developments, bringing real-time methane monitors to market. Now, the next level of industry leadership from groups such as OCGI are vital to help spur competition in this growing segment and drive unit deployment up and costs down.
Avoiding the wasteful flaring of natural gas in favor of recapturing the fuel is another worthy opportunity to tighten the oil and gas system. There are roughly 16,000 flares worldwide, and some flares burn all day and night. OGCI can galvanize investors and operators to provide the capital and incentives to put entrepreneurs to work turning wasted gas into productive use.
OGCI’s success will be measured by the amount of methane reductions it delivers. Now is the time for OGCI to set a clear path for how it will achieve success with its multi-million dollar methane mitigation endeavor.
EDF’s global goal – reducing oil and gas methane emissions 45 percent by 2025 – coincides with OGCI’s 10-year mandate and is a mark we encourage the group to embrace or exceed. Industry leaders and investors need to manage methane risk so that natural gas is a cleaner, more responsible transition fuel. Governments and their citizens need to know that industry is doing all it can to address the global methane challenge. OGCI is in a unique position to spur innovation that can satisfy both needs.
Follow Ben on Twitter @RatnerBen
Five years ago I turned in my laptop and brought my business consulting experience to Environmental Defense Fund. Some might see that move as making a break. I saw it as honoring a connection.
Public service may be the noblest calling. But it is also among the hardest. That’s why I believe business leaders have a role in government. Strong business leaders ask questions – and care about the answers. They consult experts who know more than them – and then solve thorny problems that matter to peoples’ lives. They take accountability.
So as a student of business, for much of my life I have casually told friends I would like to see an experienced business person in the Oval Office.
Now we have one.
As Donald Trump takes office, he must draw on the best skills represented in the business world.
Trump and his administration must make an urgent commitment on the economic issue of climate change and clean energy, before a problem worsens, accountability mounts, and the U.S., as the world’s second largest pollution emitter, is seen as a deadbeat on the global stage.
Trump’s handling of climate may well define his legacy, especially for generations of Americans to come.
Yet Mr. Trump has called climate change a hoax, nominated a climate skeptic to head our Environmental Protection Agency, and suggested he may pull the United States out of the Paris Climate Agreement.
We will learn a lot about the administration’s economic prowess by whether it remains lashed to a special interest agenda, or studies up and seizes climate action for the economic opportunity that it is.
The incoming administration should take a page from Gary Garfield – ex-CEO of Tennessee based Bridgestone. In an open letter to the President-Elect, Mr. Garfield observed: “A hasty decision on [leaving the Paris climate agreement], will likely isolate our nation, cede technology, innovation and jobs to China, and limit market access for our exporters.”
But it doesn’t have to be that way. Gary Garfield notes: “A decision to stay the course on climate and institute policies harnessing American ingenuity to create truly efficient clean energy technology — akin to the effort behind the Manhattan Project — will help drive both jobs and our economy for decades to come.” Mr. Garfield should know a business opportunity when he sees one; he grew profits at Bridgestone five-fold in six years.
And he is not alone. From technology to power, and investment to oil and gas, business leaders across sectors have pinpointed the urgency of addressing climate change, not just because it is the right thing to do, but because de-carbonization is one of the great economic opportunities in the 21st century:
- “With tens of billions of dollars of U.S. renewable energy investment in the works this year alone, and far more globally, the question for American political leadership is whether they want to harness this momentum and potential for economic growth” – Jonas Kron, Trillium Asset Management
- “We support [California’s] vision for a clean energy future and agree that we need to take action today to meet the challenge.” – Melissa Lavinson, PG&E Corporation
- “In Statoil, we acknowledge that there is overwhelming evidence for human-induced climate change. Climate change is happening.”
- “Finding more renewable and low-carbon energy alternatives and reducing energy intensity lowers operating costs and can enhance operational flexibility.” – Walmart
And there are scores more business leaders who recognize the data on climate change’s seriousness and recognize the responsibility – and the opportunity – their companies have to rise to the challenge. Over 600 business leaders wrote to Trump, Congress, and global leaders, to support continuation of low carbon policies, investment in the low carbon economy, and continued U.S. participation in the Paris Agreement.
There is no question that business leaders have spoken, and will continue to speak up.
Now the question is: Will Donald Trump have the business sense to listen and lead?
Follow Ben Ratner on Twitter, @RatnerBen