Oil firms pledge to pare methane leaks, positioning natural gas for the future

By Jennifer A. Dlouhy on 12/5/2017

WASHINGTON (Bloomberg) -- As the Trump administration rolls back Obama-era curbs on greenhouse gas emissions, more than two dozen oil companies are uniting in a voluntary effort to pare methane leaks and better position natural gas for a clean-energy future. 

As part of the new initiative, dubbed "the Environmental Partnership," ConocoPhillips, Occidental Petroleum Corp., Royal Dutch Shell Plc and 23 other oil and gas companies have signed agreements committing to phase out certain leak-prone devices and take other steps to keep methane from being released into the atmosphere.

The effort, coordinated by the industry’s top trade group, the American Petroleum Institute, follows a series of separate announcements by major oil companies committing to rein in the potent greenhouse gas. It also comes as oil companies seek to burnish their image and boost the clean energy profile of gas to make it more attractive for foreign buyers seeking lower-carbon sources of electricity.

"Producers have to think about the world outside the United States, and they have to think about the world after Donald Trump -- and both of those things matter when it comes to making an investment with a 15-, 20- or 50-year life" said Kevin Book, managing director of ClearView Energy Partners LLC. "For producers to credibly sell natural gas as a clean fuel into a greening world, they have to credibly show emissions-reduction technologies."

Methane, the main ingredient in natural gas, has been shown to warm the atmosphere 84 times more than carbon dioxide when measured over two decades. Oil companies have been selling gas around the world as a low-carbon alternative to coal, which produces twice as many carbon dioxide emissions when burned to generate electricity. 

But that sales pitch is undermined when methane leaks from wells and pipelines. And the Trump administration’s efforts to loosen emission-cutting requirements could worsen the situation. Under President Trump, the Environmental Protection Agency has halted writing another methane regulation for new and modified wells, and the Interior Department is planning changes to a separate Obama-era rule that applied on public land.

Erik Milito, an API group director, said the initiative is "robust" but flexible, designed to encourage companies to collaborate and share data from the field. The participating energy companies -- representing at least 26% of U.S. gas production -- commit to take "tangible steps" to address methane emissions and in exchange are free to use the initiative’s green-and-blue emblem on websites and in other material.

"Companies are signing agreements and they’re reporting the actual progress they are making," Milito said. "This is not an initiative where we are talking about what can be done; this is an initiative where companies have agreed and signed agreements to actually take the action and follow it up with reports."

Companies in the API initiative have agreed to seek out and repair methane leaks at tens of thousands of sites located in every major U.S. gas and oil basin, with detection required at least once every two years. That is less frequent than the twice-annual timetable the Interior Department imposed under a regulation last year, and the standard in some states.

Pneumatic controllers

The companies also are committing to phase out high-bleed pneumatic controllers that release gas as part of their normal operation. Analysts say it’s one of the most cost-effective emission control technologies industry can employ, with replacement devices potentially paying for themselves after just six months -- one reason some 25,000 have already been swapped out across the U.S.

Participants will provide information on their efforts annually to API, with the trade group releasing an annual report using aggregated information. That may fall short of the transparency some environmentalists and shareholders have been demanding. Oil companies have been under increasing pressure from shareholders and local communities where they operate to address the issue.

Voluntary methane-reduction programs should embody leading practices for controlling emissions and be backed by robust transparency, said Matt Watson, associate V.P. of the Environmental Defense Fund’s climate and energy program.

"If you’re going to put forward a voluntary program as part of the solution here -- and it can never be the full solution -- those emission reductions need to be verifiable," Watson said.

The new effort also departs from some recent methane-cutting commitments that have set a more robust "near-zero" emissions target. When eight major oil companies, including BP Plc, ExxonMobil Corp. and Statoil Asa, pledged on Nov. 22 to cut methane emissions, they also said they would support "sound" regulations governing the issue.

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