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As methane emissions from the oil and gas sectors come under increasing scrutiny, Cate Hight and Laura Hutchinson from the Rocky Mountain Institute, a US-based NGO, call for a differentiated gas standard that focuses on climate change and sets the bar for acceptable methane emissions
Scrutiny of oil and gas sector methane emissions is continuing to build, even as the US federal government continues its regulatory rollback. Companies are finding themselves in a bind to demonstrate, to both investors and climate-conscious gas buyers, that they are taking voluntary action to reduce these emissions.
An increasing number of companies are including methane mitigation activities in their Environmental and Social Governance reports. Several have joined coalitions focused on methane emission reductions, including the US Environmental Protection Agency’s Natural Gas Star programme, the ONE Future Coalition and the Environmental Partnership, to name a few. There is a lot of scepticism, however, about how much of a difference these voluntary initiatives can make and calls for transparency about actual emission reductions are growing.
Enter the differentiated gas market. Producers have been toying around with the idea of environmentally “better” gas for a few years now. The idea initially emerged at the height of hydraulic fracturing movement in the mid-2000s, when producers sought to demonstrate, via certified practices, that they were minimising groundwater and community impacts.
These early differentiators have taken on more of a climate-oriented flavour over the past few years, with examples including a 2019 transaction between Shell and Tokyo Gas for “carbon-neutral” liquid natural gas in June 2019 and a “responsible” gas transaction between Seven Generations Energy and Energir in February 2020.
Independent Energy Solutions (IES) was an early mover in the differentiated gas space and last month it announced that it is taking its TrustWell standard in a new, climate-oriented direction with a new “Verified Attribute” for low-methane gas production. First earned by Jonah Energy, a gas producer in Wyoming’s Green River Basin, this “badge” can be earned by companies that are also pursuing certification for several other environmental attributes under the TrustWell programme.
This is indeed a promising development as industrial gas buyers are increasingly focused on the methane emissions associated with the gas they procure. A real challenge to the IES approach appears to be a lack of transparency regarding the components of its standard, as well as the company’s practice of auditing against its own standard rather than engaging a third party, and then deciding whether to issue a certificate to the company that is paying them for the audit. This clear conflict of interest is a real risk for scalability of the IES standard, as is the cost- and time-intensive nature of certifying TrustWell producers on a well-by-well basis.
DIFFERENT APPROACH
We need a differentiated gas standard that takes a different approach. Progressive industrial gas buyers are looking first and foremost for gas with better climate performance. A standard focused squarely on “setting the bar” for acceptable methane emissions management at a facility-wide scale, backed by clear, credible, and independently verified information about which operators are meeting that bar, fills this gap. This will be key to transforming the global gas market.
Rocky Mountain Institute (RMI) is currently focused on developing a methodology for such a standard and is engaged with an ecosystem of subject matter experts that play essential roles in creating a credible standard, ranging from operators to auditors to certificate registries and gas traders. We are also in deep conversation with gas buyers, ranging from utilities to gas distribution companies to manufacturers, to understand what they really need from this product.
If you are interested in joining us in our efforts to define the future of differentiated gas, please contact us at methane-contact@rmi.org
The views expressed in this opinion are those of the author and do not necessarily reflect the position of FORESIGHT Climate & Energy
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