March 2021
by Thomas N. Russo
What is Responsibly Sourced Gas
Responsibly Sourced Gas (RSG) should not be confused with renewable natural gas which may be sourced from methane emissions from landfills, livestock and agricultural wastes, and domestic waste water facilities. What distinguishes RSG from natural gas normally produced in shale basins are the steps taken by producers to reduce methane emissions, flaring and impacts on land, water and people. Continuous monitoring and independent verification of the aforementioned steps to reduce impacts are critical to assure consumers that the production process is meeting quality standards.
RSG is not just another slogan or empty commitment without metrics to decarbonize natural gas. While the RSG industry is in a nascent stage of development, it is gaining traction. For example, the ONE Future Coalition (ONE Future) is a group of 33 natural gas companies representing 15 percent of the US natural gas supply chain. The coalition voluntarily committed to reducing methane emissions across the natural gas supply chain to 1 percent or less by 2025. ONE Future’s member companies beat their 1 percent goal in 2019 with a registered methane intensity number of 0.33 percent.
Environmental Monitoring and Independent Certification are Key
Technologies exist today to monitor and measure progress in reducing methane, CO2 emissions, flaring and other environmental impacts associated with oil and natural gas production. For example, Project Canary is a leading provider of continuous emissions monitoring for the oil and gas industry.
The company, now referred to as Project Canary, an IES company, has joined forces with Independent Energy Standards (IES) to document independent performance reports to RSG producers, sellers, buyers and ESG investors. The combined companies offer the TrustWell™ certification to document RSG performance: that certified gas is commonly described as TrustWell™ gas or RGS. Currently the TrustWell™ RGS service measures 300 engineering points of drilling rigs and is verified independently by IES via on-site inspections and document reviews. IES in turn undergoes periodic audits of its procedures.
Ideally, the TrustWell™ RSG should also include the entire natural gas supply chain, including gathering systems, treatment and gas processing plants, storage, LNG terminals, and transmission and distribution pipelines to ensure the quality of RSG and reduce the carbon intensity of the RSG even further.
Approximately 10 to12 RSG transactions have been undertaken. Southwest Energy is selling TrustWell™ RSG to New Jersey Natural Gas and Virginia Natural Gas, a subsidiary of the Southern Company. The latter company plans to source 100 percent of its gas as RSG by 2025. On November 10, 2020, VGS, a Vermont gas utility announced that it will be purchasing the Equitable Origin EO100™ certified RSG from Seven Generations Energy, an energy producer dedicated to responsible development in Alberta, Canada.
Dark Clouds on the Horizon
The challenges to US natural gas and LNG exporters are growing larger every day at the international, national, state and local levels. The European Union reached agreement with its member nations to slash CO2 emissions by 55 percent over the next decade, relative to 1990 levels. The United Kingdom also stated it would cut its emissions by 68 percent by 2030, and would also stop funding fossil fuel projects abroad with its taxpayer money. Canada said it would substantially increase its levy on CO2 to $170 per ton.
US President-elect Joe Biden announced that the US will rejoin the Paris Agreement on day one of his presidency. Not to be outdone by China and the EU, President-elect Biden has articulated very clearly in the Biden-Sanders Climate Action Plan that his Administration will curb methane emissions and rely on renewable energy to decarbonize the US economy.
While many oil and gas industry executives might question the President-elect’s ability to curb methane emissions or flaring on private land, he has considerable power on federal land to reduce and/or delay the number of drilling permits and require existing wells to reduce methane emissions and flaring from their gathering systems. Continuous monitoring and methane emission abatement could very well become standard conditions of any new drilling permits.
A very different and proactive Federal Energy Regulatory Commission (FERC) could begin revising the agency’s 1999 Natural Gas Pipeline Policy Statement and possibly require continuous monitoring of methane leaks when issuing certificates of public convenience and necessity for interstate natural gas pipelines, new LNG Export terminals and additional LNG trains. In addition, the Pipeline and Hazardous Materials Safety Administration (PHMSA) could also turn its attention to the existing 400 underground natural gas storage facilities in an attempt to avoid methane leaks such as the one that occurred at SoCal Gas’ Aliso Canyon Gas Storage facility in California in October 2015.
US LNG exporters may be especially vulnerable, as carbon prices increase in the EU and are contemplated by the top LNG importing countries, China, Japan and South Korea. According to a recent Reuters survey of eight analysts, EU carbon allowances are up 18.2 and 31.3 percent, respectively from forecasts in July 2020. The average forecast for prices in 2023 was 46.15 euros/tonne. The EU’s carbon trading system has proven its effectiveness. With the recent announcements at the 5th anniversary of the Paris Agreement, China, Japan and South Korea are very likely to choose carbon pricing as a tool to achieve their net zero carbon climate goals.
Responsibly Sourced Gas: Time to Change the Natural Gas Industry's Narrative, Pages: 22-27 First Published: 14 January 2021 | Download full paper at https://bit.ly/3aVnEJD