Methane Emissions are the “Entire Low Hanging Orchard of Fruit”

The oil and gas industry is one of the major contributors of methane emissions globally. According to the IEA, fossil fuel operations contribute up to one third of all methane emissions generated by human activity.

The gas is thought to have a more potent effect on climate change than carbon dioxide and is naturally released during the extraction of oil.

As politicians and regulators increasingly recognize the need to act swiftly on emissions, reducing methane emissions has moved from nice to have to a political imperative.

This summer, US President Joe Biden signed into law the Inflation Reduction Act (IRA), which will see companies pay an increasing fee for excess methane emissions from 2024.  

The fee is a step in the right direction but it doesn’t go far enough to tackle methane emissions, says Carl Pope, Principal of Inside Straight Strategies.

“The cost of a full recovery of methane compared to the cost of anything else we can do to protect the climate is the low hanging fruit,” he says. “It is the entire low hanging orchard of fruit.”

Pope is a prominent environmental leader and former executive director and chairman of the Sierra Club. He specializes in the link between sustainability and economic development and has served as a senior climate advisor to former NYC Mayor Michael Bloomberg (with whom he co-authored a book). 

In this interview, he explains the loopholes in the IRA's provisions on methane emissions, how he believes the oil and gas industry needs to change to seriously tackle the methane challenge, and calls for a swift transition to cleaner oil and gas production.

Diana Davis, Oil and Gas IQ: It’s been hailed as the most serious climate change bill in America's history. What's your take on the inflation reduction act’s climate credentials?

Carl Pope: The act has strong climate credentials. If we were to take an analogy, it’s like being in the middle of your mortgage payment. You’re not all the way there – you don’t own the house yet – but it’s more than a down payment.

The IRA is a good mid-range investment that should – if effectively executed – put the United States solidly on the pathway not only to a 50% reduction of emissions by 2030, but to get us all the way to net zero by 2050.

Diana Davis, Oil and Gas IQ: But I understand you found a bit of a loophole in the methane emissions legislation?

Carl Pope: The methane part of the bill is fee-based but companies don't have to pay the fee if you're in compliance with EPA standards. In theory, EPA standards should clean up all the methane that can be cleaned up.

Unfortunately, the last draft of the EPA’s draft methane rules had enormous loopholes in it. The EPA has said they will address those loopholes in the final version, which they will be issuing shortly. But we haven't yet seen it.

So, how good the methane fee part of the IRA is will be dependent on how good a job the Biden administration does in using its regulatory authority. That’s true in other areas as well.

Diana Davis, Oil and Gas IQ: What would you like to see happen with methane emissions regulations to tighten this up?

Carl Pope: There are three major loopholes. The first is that they don't cover small producers. Small producers are not necessarily small polluters. Wells, which should be shut down, are just left in “production” to avoid the cost of shutting it down because the small producers don’t want to clean it up, for instance.

These regulations need to cover everybody; everybody needs to be monitored.

The second problem is that the rules still permit somebody to locate an oil well where there is no gas pipeline. Since the producers don’t have any way to get rid of the associated gas, they say they must flare or vent it.

You should not be able to locate an oil well in a location without gas recovery capacity.

The third problem is that it is not clear that you must use zero emission equipment. The Act doesn’t require that producers complete the technology conversion they need to clean up the small wells. For example, installing electric compressors reduces methane emissions at one of the sources.

Diana Davis, Oil and Gas IQ: I hear a lot of conversations in the industry about addressing methane emissions, and it feels like at least the big companies are really trying to clean up their act. But there is a big discrepancy between the emissions that oil and gas companies voluntarily disclose, and the methane emissions reported by outsiders. What's your take on this?

Carl Pope: The problem is that the EPA does not require emissions to be measured. It lets people report their emissions based on assumptions, which are not consistently true. The EPA needs to require real emissions monitoring and reporting.

I think the big companies will do it; the business model of the big producers is very compatible with very aggressive methane recovery.

The longer-term problem is that the business model of the wildcatters is not compatible with methane recovery. When a wildcat or goes to build to produce oil and they're mostly doing oil, not gas. They want to get that well to production in three months because they time the market; they are trying to open production when the market is high.

The problem has always been that cleaning up the oil patch requires setting standards that would require major changes in the business model of wildcatters.

The big companies want the wildcatters out there so they can acquire their assets. I think the wildcat window needs to be shut. I have no objection to small producers, but the small producers have to be going after oil that they can produce over time.

They should be required to change their business model. They can't have a business model that's based on timing the market, or they won’t make the investment required for cleaning up their emissions.

Diana Davis, Oil and Gas IQ: In the climate debate, we sometimes like to have villains and fossil fuel companies are often cast in that role. But the industry is made-up of people that also have genuine concerns about the environment. What would you say to our oil and gas audience about methane emissions?

Carl Pope: The cost of a full recovery of methane compared to the cost of anything else we can do to protect the climate is the low hanging fruit. It is the entire low hanging orchard of fruit.

The people who work in oil and gas may be very good people, but they don't set the ground rules the way the companies are structured, the way their business models are structured, the way their debt instruments are written, and the way their capital stocks are constructed.

What drives this is not the fact that there are bad people in the industry, it’s that the industry needs to move its business model to clean up methane. If it can’t find a way to product much cleaner oil and gas, then it doesn’t deserve to survive.

Diana Davis, Oil and Gas IQ: But we rely so much on fossil fuel and our energy needs are growing. The pain that consumers and industry is feeling from Russia’s war in Ukraine really puts a spotlight on how much we rely on reliable and cheap energy sourced from fossil fuels. What do you see as that balance and trade off to get to net zero?

Carl Pope:  Right now, we know how to produce the world's cheapest electricity, and it doesn't require gas or oil. Right now, we know how to heat your home, cook your food, and give you a hot shower cheaply, without using fossil fuels.

We have a huge array of things we can already do without fossil fuels, but they require more upfront investment. When you’re using solar energy, for instance, you don’t pay for the fuel, but you pay for the solar panel.

The capital costs with renewable energy are higher but the energy prices are lower.

We can't do it all yet. We need to do the research to get things like clean chemicals and clean steel, for instance. But the reality is that the technology pace we have experienced - first with solar and now with batteries – will enable us to get zero emissions by 2050 while lowering energy costs between now and 2050.

We need to do what we can right now and invest in expanding our capabilities to do more.

Interested in learning more about this topic?

If you’re tasked with reducing methane emissions in your operations, join us at the National Summit on Methane Mitigation, taking place at the Norris Conference Centre, Houston on December 6-8, 2022. Join over 200 of your industry peers to get up to the minute updates on methane mitigation research and development efforts including monitoring sensors, data management systems, modular conversion technologies and alternative uses for stranded natural gas. Download the agenda now for more information.