Big Oil Worries About Methane, Even If Trump Doesn’t
(Bloomberg Opinion) -- Methane matters.
It matters because, while carbon dioxide gets most of the attention, methane is a far more powerful greenhouse gas — a staggering 84 times more potent at trapping heat for at least 20 years after it’s been released into the atmosphere. It is thus important to reduce methane emissions as part of the broader fight against climate change. The good news is that it’s an effort that doesn’t require radical behavioral changes. It’s a manageable task.
Much of the methane that is emitted into the atmosphere is the result of leaks from natural gas wells. Thanks to hydraulic fracturing — fracking — the U.S. is currently producing about 81.3 billion cubic feet of natural gas a day. In 2016, the U.S. Energy Information Administration estimated that there were 2.5 trillion cubic feet of “technically recoverable” natural gas in the various shale formations like the Bakken in North Dakota, the Permian Basin in Texas and the Marcellus in Pennsylvania. The country is swimming in natural gas.
Ever since the shale boom began around 2005, the proponents of natural gas have been extolling it as a cleaner fuel than oil or coal; indeed, when it’s combusted, natural gas emits half the carbon of coal. That this message has taken hold is undeniable; it’s a major reason so many U.S. power companies have been closing down coal-fired power plants and replacing them with gas-fired power plants. Today, more energy is generated by natural gas than by coal.
But methane leaks are the Achilles’ heel of fracking because if enough methane leaks from the wells, it negates natural gas’s climate advantage. In 2012, an important paper written in part by Steven Hamburg, the Environmental Defense Fund’s chief scientist, showed that so much methane was leaking or “flaring” from wells that it needed to be reduced by 45 percent to 70 percent for natural gas to produce climate benefits. At the time, the estimated leak rate was between 2 percent and 6 percent of the gas.
EDF and several other environmental groups began sounding the alarm. A number of states, starting with Colorado, passed laws to force drillers to inspect for leaks, and to fix them when they were discovered. In 2016, the Environmental Protection Agency under President Barack Obama promulgated its own rules to reduce methane leaks. It requires that wells be inspected twice a year, and that leaks be plugged within 30 days.
Once President Donald Trump took office, a number of midsize fracking companies, led by Continental Resources Inc., whose chief executive Harold Hamm was a prominent Trump supporter, began lobbying to have the rules pared back. Sure enough, that is exactly what is happening.
Last week, for instance, the EPA announced new proposed rules that would cut back the leak inspections to once a year for most wells and once every two years for low-producing wells. Companies will have 60 days to fix the leaks instead of 30. The excuse for doing this was — of course! — that it would “alleviate unnecessary and duplicative red tape” while reducing fracking costs. An executive from the Western Energy Alliance, a lobbying group based in Denver, described the Obama rules to the New York Times as “a record-keeping nightmare that was technically impossible to execute in the field.”
Then, just this past Tuesday, the Interior Department announced it was finalizing its own proposed regulations to relax methane standards for oil and gas wells that are drilled on public lands. The department claimed its new rules will save energy companies $1 billion over 10 years.
These are not small changes. The EPA itself estimates that when the Trump rules go into effect, it will result in 380,000 additional tons of methane spewed into the atmosphere between 2019 and 2035. According to the Associated Press, that is the equivalent of 30 million tons of carbon dioxide. Worse yet, it is widely expected that these rules are a precursor to a far more radical move: eliminating methane regulations altogether.
So far, this story is exactly what you’d expect: The Trump administration, contemptuous of government efforts to stop climate change, currying favor with business and exhibiting hostility to anything Obama did, takes shortsighted steps that will hurt the country. It’s infuriating, yes, but it’s also the kind of thing that is happening all over the federal government. Most of these actions don’t get noticed because so much attention is focused on the zoo that is the White House.
Here, however, there’s a heartening plot twist. Big Oil is refusing to go along. As it turns out, while the midsize drillers have been complaining about the Obama rules, the major oil companies have been on board with reducing methane practically from the start. Using improved technology and constant monitoring, most of them have reduced their methane emissions to under 1 percent.
Thus, instead of applauding the Trump administration for lightening their regulatory burden, they have been doubling down on their commitment to reduce methane leaks. On Monday, less than a week after the EPA announcement, Royal Dutch Shell PLC unveiled its plan to reduce methane emissions to 0.2 percent by 2025. Exxon Mobil Corp. and BP PLC made similar announcements in the spring. And according to the Wall Street Journal, a group called the Oil and Gas Climate Initiative, made up of major oil company chief executives, said that it will announce methane targets by the end of the year.
“Everybody should want their product to stay in the pipe and be sold to the customer rather than leak it,” Shell’s head of gas, Maarten Wetselaar, told the Journal. “It’s essentially uncontroversial. Nobody in the industry should want to leak any methane.”
But profit-maximization isn’t the only reason Big Oil wants to reduce methane emissions. Executives also understand that natural gas’s inherent advantage is that it’s the fossil fuel that does the least harm to the environment — and that advantage is lost when too much methane leaks out.
BP, for instance, is becoming more of a natural gas company than an oil company, so it wants to emphasize every possible advantage natural gas has over oil or, especially, coal. This summer, Bernard Looney, the chief executive of BP’s global upstream business, said in a speech that by 2040, the world would need “a third more energy than it does today.” At the same time, however, it needs to cut greenhouse-gas emissions in half. Natural gas, he said, was the only practical way to get there.
“Every methane molecule we can keep in the pipe,” Looney said, “helps keep atmospheric concentrations down and helps reinforce the argument for natural gas.” He concluded that “containing methane is good for business and good for the environment.”
With any luck, Big Oil’s insistence on continuing to reduce methane leaks will minimize the damage the Trump administration’s new rules can do. And if a Democrat is elected president in 2020, the Obama regulations will be reinstated before the Trump rules cause too much harm. Because, as Big Oil knows — and as the Trump administration apparently doesn’t — methane matters.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Joe Nocera is a Bloomberg Opinion columnist covering business. He has written business columns for Esquire, GQ and the New York Times, and is the former editorial director of Fortune. He is co-author of “Indentured: The Inside Story of the Rebellion Against the NCAA.”
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