July 2023

The ESG perspective

Responsibly sourced gas vs renewable natural gas
Mark Patton / Hydrozonix

I’ve mentioned before there is a strained relationship between ESG and the oil and gas industry. I’m a fan of Chris Wright, with Liberty Oil and Alex Epstein. I think they both are great spokespeople for our industry. But many believe their beliefs and opinions support an anti-ESG movement. Part of the anti-ESG movement comes from a lack of transparency or consistency in how ESG principles are applied to oil and gas, as compared to other industries. So, let’s take a look at how responsibly sourced gas (RSG) and renewable natural gas (RNG) are viewed and treated by the ESG community. 

Renewable natural gas (RNG). RNG is also referred to as biogas and is considered by the EPA as an upgraded source of fuel over use of “fossil natural gas”—a term the EPA uses for natural gas from traditional oil and gas operations. RNG/biogas can come from many sources, including landfills, digesters at wastewater facilities, livestock farms and composting operations, to name a few. RNG projects have more than tripled since 2015, with many of the supermajors having some form of RNG program. Part of the preference for RNG comes from the elimination of a source of methane that can leak into the environment. As you can imagine, depending on the source, there is some significant processing required for this typically lower-quality and higher-contaminant-loaded fuel, when compared to fossil natural gas.  

To offset some of this additional cost there are some National, state, and local incentives including credits available to RNG. Now the issue I have is although RNG is preferential in the eyes of the EPA, it requires more processing, more energy, more human intervention than “fossil natural gas.” This would, as you can imagine, increase the energy and carbon footprint of RNG when compared to “fossil natural gas,” yet it is preferential. The justification is you are using a resource that would otherwise leak into the environment. We will get back to this point in a minute. 

Responsibly sourced gas (RSG). RSG is a relatively new term that has entered our vocabulary. With everybody talking about rolling out a carbon-neutral gas, the term “responsibly sourced gas” entered the picture. But what is RSG? Essentially, RSG is natural gas that came from a source that is leaking less natural gas than the average oil and gas industry producer. Current numbers, nationally, have methane leaks at about 2.3%. There have been a handful of companies, like the Canary Project, who are certifying RSG, and although I say leaking less than the average, there are, depending on the certifying group, other factors involved, like water stewardship, land management and community impact. The problem is the standards are subjective, and there are many groups pushing against the term RSG as false advertising or greenwashing.  

One of the problems is that again, depending on the certifying group, you can get additional credit for planning on reductions without achieving them. Regardless, RSG is required by many purchasers of gas, and it is being used today as a standard. So, what happens as the industry average is reduced—do you lose your certification? There are many questions and not a lot of answers when it comes to RSG, but the expectation is that universal standards will have to be developed, in order for RSG to become a supported standard. Additionally, you still have to consider offsetting the combustion of methane and can’t truly market RSG as a carbon neutral fuel, but in my opinion, that is where the RSG standard is heading. 

Satellite tracking of methane. The advancements of satellite tracking have become very eye opening, as many new methane leaks and sources are being identified. Massive methane leaks can come from the sea floor, ice caps but also from pipeline leaks. There are some reports that the anti-flaring initiative has led some less regulated countries to stop flaring, because flares are widely visible, and go to venting, which, until satellite imaging was used, was much harder to detect. I mention the new impact of satellite imaging because with RNG, the justification of prioritizing it was to eliminate to potential for it to leak into the environment, but in reality, we have natural leaks of methane occurring that would justify tapping into these sources and recovering this methane to prevent it from leaking as well. So, when it comes to “fossil natural gas,” you can prevent leaks by recovering it, and because it requires less processing, it will have a lower carbon footprint than RNG. 

Oil and gas bias. So, this leads right back to the anti-ESG movement: why is RNG preferential to “fossil natural gas,” when they both can prevent methane leaks into the environment and “fossil natural gas” is potentially a lower carbon source? The problem is that the inconsistency in the application of a standard is not a reason to abolish standards. Let’s look at this differently: when minority groups were found to be more likely to be jailed, the reaction wasn’t to abolish the laws—it was a call for fair enforcement. We don’t abolish ESG because of the inconsistency of the standard; we call for consistency. I say this, but I still think we have too many problems with RSG that need to be addressed before we accept it as a standard. However, these changes are in the works, either voluntarily or by mandate. 

Proposed updates to greenhouse gas emissions. On July 6, 2023, the EPA issued a proposal to amend requirements for oil and gas facilities, under EPA’s Greenhouse Gas (GHG) Reporting Program.  This was not unexpected in the Inflation Reduction Act (IRA). (You know, the one that doesn’t reduce inflation? Sorry, couldn’t help myself.) Well, under the IRA was the development of a Methane Emissions Reduction Program, so if you were paying attention, you knew methane reduction was coming. Under the proposal, the universe of what is reported has increased, to cover what the EPA referred to as gaps in the reporting requirements. The largest impact is likely the “other large release events” category. So, when I mentioned satellite imaging, one of the surprises found was large leaks on pipelines that were mostly unreported. Typically, these were accidents or overpressure events, but nonetheless, satellite images found these to be excessive in some locations. By adding these events, the leak amounts will likely go up. Additionally, the EPA is amending and adding methods for the emission calculations to improve accuracy. Once this proposal makes it to the Federal Register, there will be a 60-day public comment period, with an effective date of January 1, 2025. 

What happens to RSG. If the universe increases and the reporting changes, then the average methane leaks will change, which means there will have to be some changes to RSG certification. But let’s not fool ourselves; increased monitoring and reporting is the first step towards new standards. There will likely be a new standard for allowable methane leakage, and that will help reinforce the less subjective approach we have to RSG today. 

I’ve warned you: the path to ESG will be loaded with give and take, but it is still necessary for our industry to reclaim public acceptance. We need to be transparent on both sides of the ESG argument, and we need a balanced approach of how we apply carbon intensity calculations and let science, not politics, dictate policy. ESG is not going away, and we need to understand how to navigate its murky waters. 

About the Authors
Mark Patton
Mark Patton is president of Hydrozonix and has more than 30 years of experience developing water and waste treatment systems for the oil and gas industry. This includes design, permitting and operation of commercial and private treatment systems, both nationally and internationally. He has seven produced water patents and two patents pending. He earned his B.S. in chemical engineering from the University of Southern California (USC) in 1985.
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