Disclosing the Facts 2017: Transparency and Risk in Methane Emissions is an investor report designed to promote improved methane management and reporting practices among oil and gas producers. This report is both broader and more limited than prior Disclosing the Facts reports. Prior DTF reports have focused on best practices across a range of risk areas (chemicals, air, water, community impacts) by oil and gas companies engaged in horizontal drilling and hydraulic fracturing in the United States and Canada. While Disclosing the Facts 2017 focuses on a single issue -- methane emissions management -- the report does not limit its focus to fracturing operations in unconventional resources. Since methane emissions can occur across unconventional and conventional upstream exploration and development, this full range of operations is included.Download the Executive Summary
We note the entire natural gas value chain merits attention, from upstream production operations through distribution to end-users (power plants, manufacturing operations, and business and residential consumers). The U.S. Environmental Protection Agency estimates that natural gas and petroleum systems are the largest contributors to U.S. methane emissions, with upstream gas and oil production contributing 72 percent of the system’s methane emissions.
Investors are focused on methane because it is the primary component of natural gas and has an intense, short-term climate forcing impact. Over a twenty-year period, methane’s “global warming potential” is at least 84 times that of carbon dioxide. Natural gas is often promoted as a bridge fuel to help move the global economy away from high carbon energy sources such as coal. Accordingly, oil and gas companies are increasing the percentage of gas in their energy resource base, with the intent of decreasing the greenhouse gas intensity of their product mix. But while natural gas burns more cleanly than coal, to the extent methane emissions from across the natural gas and oil value chain are not controlled, the potential benefit from burning gas over coal will be lowered.
Investors’ attention to methane reflects their increasing focus on reducing “carbon risk” in their portfolios. Portfolios commonly hold a wide spectrum of economic sectors, so issues from rising sea levels, to increased storms, physical damage to buildings and infrastructure, changes in water availability, and reduced agricultural productivity, among others, caused by a warming globe will have negative long-term portfolio implications. In fact, these harms are already being felt across the U.S. as 2017 brought some of the most intense hurricanes on record, floods, drought, and raging wild fires across western states. Global regulatory responses to climate change are also increasing business risk to carbon-intensive companies such as oil and gas producers. Governments around the globe have agreed to take measures to keep warming well below 2 degrees Celsius, highlighting the global intention to transition away from carbon-intensive fuels.
Reducing methane emissions can also be cost-effective for companies. Efficiencies can be improved as new methane-reducing equipment is put on-line and methane emissions can be captured and placed in pipelines for sale or used to power operations. The rate of return on investment depends on amounts of gas captured, efficiencies achieved, the expense of monitoring and capture, and the market price of natural gas.
Following the maxim of “what gets measured gets managed,” and to address rising investor concern, Disclosing the Facts 2017 ranks companies on disclosures of key elements of their methane emission management and reduction processes. Disclosing the Facts 2017 seeks disclosure not only of quantitative information about the impacts of company operations to eliminate methane emissions but also qualitative information about corporate policies and practices. Sound corporate management of upstream methane emissions requires thorough, systematic planning, from site development through capturing gas and oil in pipelines. New wells need to be sited near existing gas transport infrastructure or not placed in operation until such infrastructure is created. Companies should deploy advanced equipment designs that eliminate or minimize emissions. Focused emissions monitoring and measuring programs will not only end existing leaks, but help establish maintenance priorities for preventing emissions.
Methane emissions management programs should encompass the thousands of existing facilities whose construction predates U.S. EPA regulations that impose tighter standards on new and modified facilities. Because of their age and use of older technologies, existing facilities may be especially sizeable emitters. The best company programs establish targets for reducing overall emissions intensity (the percentage of methane emissions compared to production), provide economic incentives to senior and field staff for reductions, and report progress over time. Since the U.S. EPA emissions inventory is based primarily on increasingly outdated engineering calculations and measurements, improved emission measurements are essential. The best company programs will generate measurement data to focus company reduction initiatives and help improve the EPA inventory data.
Disclosing the Facts 2017 comes at a time of increased industry attention to methane emissions and regulatory change. This increased focus on methane is highlighted in a number of recent announcements of voluntary emissions reductions, reporting measures, and reduction targets. The American Petroleum Institute announced the formation of an environmental partnership of 26 companies, including many of the top U.S. natural gas producers, to cut methane leaks from wells and other U.S. onshore production sources. Reporting under this system will be a compilation of members’ actions, with no clear commitment to company-specific disclosure. In November, large international oil and gas companies including ExxonMobil, signed on to “guiding principles” for cutting methane emissions. These announcements are in addition to voluntary commitments and reduction targets announced in 2014 and 2016 by members of the ONE Future Coalition.
It is noteworthy that these industry announcements come in the face of persistent federal efforts to roll back existing methane regulations in the U.S. As this plays out, investors will continue to advocate for sustained action and objective, quantitative disclosures by industry, regardless of regulatory status. A clear goal of this report is to establish a set of well-defined, minimum guidelines for methane management and disclosure by oil and gas companies.
Disclosing the Facts 2017 poses 13 questions reflecting a thorough, systematic approach to methane emissions management. The actions of 28 companies are assessed against these criteria, which range from engineering and maintenance practices, to thoroughness of Leak Detection and Repair (LDAR) programs, leak repair times, beyond-compliance venting and flaring reduction programs, replacement of high-bleed pneumatic controllers at existing facilities, and progress in and incentives for achieving methane intensity targets. To speed adoption within the industry of enhanced emission detection and reduction, Disclosing the Facts 2017 highlights nearly 50 notable practices by individual companies whose adoption other companies should consider.
These tables contain the score breakdown for each company by indicator. A checkmark means the company earned a point for that metric.
|COMPANY||LDAR program description||LDAR methodologies||LDAR frequency and assets covered||Leak Repair Procedures||Engineering and Mainenance Practices||Leak Detection Training||Methane Emissions Reduction Target||Venting Practices||Flaring Practices||Methane Intensity Rate||Actual or Estimated Emissions Reporting||High Bleed Controller Replacement||Greenhouse Gas Reduction Incentives||Total|
The information in this report has been prepared from sources and data the authors believe to be reliable, but we assume no liability for and make no guarantee as to its adequacy, accuracy, timeliness, or completeness. Boston Common Asset Management, LLC may have invested in and may in the future invest in some of the companies mentioned in this report. The information in this report is not designed to be investment advice regarding any security, company, or industry and should not be relied upon to make investment decisions. We cannot and do not comment on the suitability or profitability of any particular investment. All investments involve risk, including the risk of losing principal. No information herein is intended as an offer or solicitation of an offer to sell or buy, or as a sponsorship of any company, security, or fund. Opinions expressed and facts stated herein are subject to change without notice. The views expressed in Disclosing the Facts 2017 do not necessarily express the views of all IEHN members.