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Texas report highlights conflict between methane intensity reductions and rising total emissions

20 August 2021 Kevin Adler

A new report by environmental groups Earthworks illustrates the wide gap that exists between activists focused on reducing total methane emissions as soon as possible and companies and regulators who point to accomplishments so far as evidence that the problem is being addressed.

Nowhere is this more evident than in debate over the value of reductions in emissions "intensity" vs. overall emissions decline. Emissions intensity is the level of emissions per unit of output of oil and natural gas. Oil companies, trade groups, and regulators in Texas, which is the focus of the new report, continue to focus on huge strides made to reduce methane emissions on a per-barrel or per-million-cubic-foot basis.

In a report published 19 August, Earthworks compared real-world flaring detected by Environmental Defense Fund's (EDF's) helicopter technology with records kept by the Railroad Commission of Texas (RRC), which regulates oil and gas exploration and transport in the state, showed a huge discrepancy. Of 227 flares directly observed by helicopter with optical gas imaging cameras, EDF found that 69-84% of the flares did not have required flaring permits, known as Rule 32 exceptions. The 84% represents the findings of Earthworks and EDF; the 69% represents the low end of the range, based on RRC's identification of some flares as permitted after being shown the preliminary findings.

Texas is the largest oil-producing state in the US and the second-largest gas producer. According to IHS Markit, Texas averaged about 4.7 million barrels per day of production over the last 12 months, more than double any other producing area, including the offshore Gulf Coast. Its gas production was nearly 22 billion cubic feet/day for the last 12 months, behind only the Marcellus-Utica basins in Pennsylvania, Ohio, and West Virginia.

Environmental groups say that as long as production of oil and gas continues to rise, it is wiping out much or even all of the intensity gains, thus leaving the world with methane emissions much higher than is sustainable for climate and temperature stability. These groups say that total emission reductions are the only thing that ultimately matters, and that talking about methane intensity is a distraction.

The problem, the groups say, is that flaring of gas exacerbates global warming because methane is 84-86 times more potent a GHG than CO2.

EDF has estimated that Permian Basin oil and gas operations release at least 300,000 metric tons of methane annually, which is about three times the figure reported by the US Environmental Protection Agency (EPA).

When is progress not enough?

The response of RRC Chairman Christi Craddick to the report references the industry's accomplishments to date. "Texas is seeing significantly reduced flaring rates as a result of improved technologies, infrastructure, and regulatory processes," she said in a tweet on 19 August.

Although this is accurate, environmental groups argue that's irrelevant in a world that needs to rapidly knock down methane emissions as low as possible, "The claims to reduce methane are based on 'methane intensity,' which has to do with reducing methane per barrel not overall. It's deceptive. Methane won't come down in our atmosphere until they stop expanding [production]," Sharon Wilson, Earthworks senior field advocate and co-author of the report, told Net-Zero Business Daily by email on 19 August.

Added Josh Eisenfeld, corporate accountability campaigner with Earthworks: "If it wasn't clear before the most recent UN Intergovernmental Panel on Climate Change report, it is abundantly clear now. Intensity metrics are NOT climate commitments, they are marketing."

It's quite possible for a company to show reduced carbon and methane intensity "while drastically increasing their overall carbon footprint," he said in a 19 August email.

More to the picture

But lower methane intensity does represent major cutbacks in flaring, explained Shell Oil spokeswoman Natalie Gunnell in a 19 August email. Shell and ExxonMobil were specifically cited in the Earthworks report as large producers in the Permian who have been flaring gas without permits. None of the seven Shell flares detected by EDF's helicopter flights were permitted, according to the report.

Since 2016, Gunnell explained, Shell has designed its well pads in the Permian without high-pressure flares, which means that "facilities are shut in if gas gathering lines are not available at the well pads."

Since 2018, she said the company has not routinely flared in the Permian, according to the World Bank's definition of routine flaring. Shell's flaring in the basin is done for safety, maintenance, or emissions control reasons, and Gunnell added, "Shell is not venting/flaring without required permits."

However, her comments raised the intensity-vs.-volume issue, as she stated the following: "We are proud to say that since 2017, we have reduced our GHG and methane intensity in the Permian asset by around 80%, and also reduced flaring by more than 80%—all while increasing production of our operated assets by nearly 120%."

This balancing act has both practical and public relations implications, observed Morgen McGuire, IHS Markit research and analysis associate director, in an email 19 August. "The operators in Texas, especially public ones, are keen on environmental issues and appear to be taking every measure to reduce flaring of their own wells and even neighbors by building infrastructure to handle it," he said. "This would include waiting on infrastructure to complete, high-efficiency flaring tips, leak detection, and repair, etc. to make sure they have as low of an impact as possible."

Added McGuire's colleague Prescott Roach, IHS Markit senior research analyst: "We see a general pattern in which larger publicly-traded firms generally have lower rates of flaring than their private, smaller peers."

He noted that public oil and gas producers BP, Callon Petroleum, Centennial Resource Development, ConocoPhillips, and Laredo Petroleum have stated they plan to reach zero routine flaring by 2025, and Chevron, Pioneer Natural Resources, ExxonMobil, and Occidental have announced their intent to eliminate routine flaring by 2030.

Texas

Under Texas law, operators can flare for the first 10 days of production, but they must obtain a Rule 32 permit for additional flaring (with a few exceptions). Permits can be issued for up to 180 days and can be extended, though the RRC said the average is 88 days.

While that looks good on paper, Earthworks said the system is rife with problems. These begin with too many Rule 32 permits being issued and include the RRC not carefully tracking flaring under those permits. More than 6,900 permits were issued in 2019, compared with fewer than 650 in 2009.

This is in addition to the indications from EDF's helicopter flights that the commission is allowing flaring at far more sites than where permits have been issued.

"It is unclear how the RRC enforces these limits through anything other than the honor system. Not every flare stack is metered by the RRC, nor are sites required to procure meters. Thus, operators could exceed these volume limits without the RRC realizing," Earthworks wrote.

But that criticism is an incomplete picture, said IHS Markit's McGuire. "The [report] makes it seem like the RRC has a blind eye toward flaring," McGuire said, but he disputed that implication. He said the rules are actually fairly rigorous, with requirements to file for extensions for even extra hours of flaring in a test well, public disclosure, and other features.

"The state, like most others, collates the reported flaring and makes the data available to the public," he said. "When a well is not turned in line there is little to do but flare/vent the gas coming out, and flaring is significantly better for the environment than venting."

In a study published in July, IHS Markit's Roach said that data from individual wells in the Permian and in the Bakken Basin in North Dakota indicate that operators "have significantly reduced flaring rates on individual wells since 2020."

This coincides with the rise in environmental-social-governance reporting by upstream operators, which typically includes CO2 and GHG reduction goals. Roach said this indicates how public pressure is leading to efforts to improve gas capture rates.

The question is what will happen next. "My view is that the proof of how serious operators are when it comes to reducing flaring emissions will be shown by whether or not flaring goes right back up over the next few months, given that drilling and completions activity has ramped up sharply from its 2020 lows," Roach added.

Urgency

Actually, what might happen is that the federal government could step in. President Joe Biden has ordered the EPA to review methane New Source Performance Standards enacted in 2016 during the Obama administration and then rescinded by President Donald Trump through a new rule in 2020. However, this year Congress passed a resolution under the Congressional Review Act to rescind the 2020 rules, which Biden signed in June.

EPA has been taking public comment on the rescission of the Trump rules and the new regulations it should enact. Earthworks has proposed a 65% reduction by 2025 from 2012 levels, rather than the 43% of the Obama-era rules. "This is a necessary step, but that's not enough to get us where we need to be, and it's not likely that Texas will comply," Eisenfeld told Net-Zero Business Daily.

Without stating a specific level, Biden officials have said that tougher methane standards would offer "near-term solutions" to help address climate change.

The Texas RRC wrote to EPA in July to say that it opposes any federal oversight of oil and gas methane emissions, arguing that it has "effectively regulated the oil and gas industry in Texas since 1919." The letter noted the 14.8% national reduction in methane emissions since 1990, due to the industry's technological advances.

The RRC said that the original 2016 rule was a "one size fits all" program that would impose immense new costs, even on low-volume "stripper wells" that produce little emissions. It suggested exemptions for wells with less than 15 barrels/day of oil production or a ratio of less than 300 cubic feet of gas per barrel of oil production. The letter also expressed concerns about the costs of the leak detection and repair rules and a requirement for third-party review and certification of data.

The US attention to methane comes in the context of calls with growing urgency internationally. The UN Intergovernmental Panel on Climate Change's (IPCC) last week issued its key report before the COP26 meeting in November, the "Sixth Assessment Report: The Physical Science Basis," in which it stated that methane levels are now higher than at any point in the past 800,000 years. The IPCC said methane emissions account for about 30% of global warming to date, and it called for "strong, rapid, and sustained reductions" in methane emissions.

Even the US Department of the Treasury has gotten in on the act, with an announcement this week that it is encouraging multinational development banks such as the World Bank Group and the Asian Development Bank to invest in methane reduction and carbon capture and storage projects around the world.

A UN study released in May said readily available technologies to capture methane from the fossil fuel sector, along with some additional measures such as fuel shifting to renewables, would avoid nearly 0.3 degree Celsius of global warming by 2045 and would be consistent with keeping the Paris Climate Agreement's goal within reach.

The question is whether voluntary programs, such as the EPA's Methane Challenge and the industry's Environmental Partnership will be enough, or whether regulations will push for faster, deeper reductions.

For environmental groups, it's clear more must be done, and they are pushing for a tough nationwide program, citing studies such as the new Earthworks findings as evidence about the gap between reality and the necessary destination. "No state emits more toxic chemicals and methane from oil and gas than Texas, and yet Texas regulators have turned a blind eye toward adopting new regulations and only enforce selectively," said Cyrus Reed, conservation director of the Sierra Club Lone Star Chapter.

"Unless we can change our captured state agencies we will have to rely on federal rulemaking and oversight, citizen suits, and enforcement and reports like this one [from Earthworks] to shine a light on an out-of-control industry and a corrupt regulatory regime," he said.

Posted 20 August 2021 by Kevin Adler, Editor, Climate & Sustainability Group, IHS Markit

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