natural gas

Reducing methane emissions from the oil and gas sector

The Environmental Protection Agency (EPA) is pursuing regulatory and voluntary steps to reduce methane emissions from the oil and natural gas production system, the largest manmade source of this potent greenhouse gas.

On January 14, 2015, EPA announced a goal to cut methane emissions from the oil and gas sector by 40 – 45 percent from 2012 levels by 2025. As part of achieving this goal, it released proposed regulations under Section 111(b) of the Clean Air Act on August 18, 2015 for new and modified sources of methane emissions from the oil and natural gas sector. These regulations will be finalized by summer 2016.

EPA also plans to work collaboratively with industry and states, including expanding its voluntary Natural Gas Star program, to reduce methane from existing oil and gas operations.

Steps to reduce methane from other sources, such as landfills and coal mines, are also part of President Obama’s Climate Action Plan.

What is methane?

Methane, or CH4, is the main component of natural gas. When combusted as fuel, natural gas produces half as much carbon dioxide emissions as coal, and one third less than oil (per unit of energy produced). However, natural gas that is released into the atmosphere without being combusted is a potent greenhouse gas.

Why is it important to reduce methane emissions?

Methane is the second biggest driver of climate change. It is much more potent than carbon dioxide (CO2) at increasing the atmosphere’s heat-trapping ability, but it remains in the atmosphere a much shorter time (a little more than a decade compared with hundreds of years for CO2).

Averaged over a 100-year time frame, the warming potential of methane is about 21 times stronger than that of CO2. However, in a 20-year time frame, it is 72 times more potent. (The most recent report by the Intergovernmental Panel on Climate Change raises estimates of the global warming potential of methane to 34 times stronger than CO2 for the 100-year time frame, and 86 times stronger for the 20-year time frame. However the earlier estimates are still used to maintain comparability among U.S. greenhouse gas Inventory reports.)

Because methane is potent and short-lived, reducing methane emissions can have a more immediate benefit, and is especially important at a time of growing U.S. oil and natural gas production.

What are the primary sources of methane emissions in the United States?

Natural gas and petroleum systems are the largest emitters of methane in the U.S., according to EPA estimates. These emissions come from intentional and unintentional releases.

Agriculture, solid waste landfills, and coal mines are also major sources and are addressed by other EPA programs.

Figure 1: 2012 U.S. Methane Emissions, By Source

In 2012, U.S. methane emissions totaled 567 million metric tons of carbon dioxide equivalent.

Source: U.S. Environmental Protection Agency, “Draft Inventory of U.S. Greenhouse Gas Emissions and Sinks: 1990-2012” (Washington, DC: U.S. Environmental Protection Agency, 2014), http://www.epa.gov/climatechange/ghgemissions/usinventoryreport.html.

How much methane is released in oil and natural gas production and how will this announcement improve the accuracy of measurements?

Methane is released unintentionally and intentionally from oil and gas systems. According to EPA, natural gas and petroleum systems were responsible for 29 percent of methane emissions in 2012. The rate of methane emissions from the sector has decreased in recent years, even as natural gas production has surged.

However, independent studies estimate a wide range of leak rates from natural gas production, from 0.71 to 7.9 percent. More comprehensive studies are needed for accurate results.

EPA has committed to examining options for applying remote sensing and other technologies to improve methane emissions data accuracy and transparency, and strengthening reporting requirements for methane in its Greenhouse Gas Reporting Program.

Why is methane intentionally released?

In the production process, small amounts of methane can leak unintentionally. In addition, methane may be intentionally released or vented to the atmosphere for safety reasons at the wellhead or to reduce pressure from equipment or pipelines.

How does EPA propose to address methane emissions from oil and natural gas production?

EPA proposed a rule in August 2015 that will require new operators of new oil and gas wells to find and repair leaks, capture natural gas from the completion of hydraulically fractured oil wells, limit emissions from new and modified pneumatic pumps, and limit emissions from several types of equipment used at natural gas transmission compressor stations, including compressors and pneumatic controllers. EPA estimates that this proposal would prevent the emission of 340,000 to 400,000 short tons of methane in 2025, which is the equivalent of 7.7 to 9 million metric tons of carbon dioxide. A final rule is expected in 2016.

EPA already regulates Volatile Organic Compounds (VOCs, which are ozone-forming pollutants) from new oil and gas production sources, which has the side benefit of also reducing methane. EPA plans to apply VOC standards to existing oil and gas systems in areas that do not meet the ozone health standard and in northeastern states in the Ozone Transport Region.

For other existing oil and gas production, EPA said it will work collaboratively with states and industry, including the One Future Initiative and the Downstream Initiative, to reduce methane emissions through voluntary programs, such as the Natural Gas STAR program. One Future and the Downstream Initiative are industry-led, voluntary partnerships to reduce methane emissions from across the natural gas value chain and within distribution networks, respectively. The goal is to encourage innovation, provide transparency, and track progress toward specific methane emission reduction goals. The announcement noted that voluntary action by industry may reduce the need for future regulation, referring to regulation of existing sources under Section 111(d) of the Clean Air Act. However, the administration noted that they will be evaluating progress on voluntary actions and determining if any additional steps are needed.

In addition, the Interior Department’s Bureau of Land Management has committed to update its standards to reduce leaks and flaring of methane from both new and existing oil and gas wells on public lands. The timeline to propose new standards, which was to happen in spring 2015, has been delayed.

What entities will be covered by the regulations?

The proposed rule would cover new and modified oil and gas production sources, and natural gas processing and transmission sources. Specifically, EPA notes it will look to reduce emissions from five specific sources discussed in technical papers released in spring 2014: oil well completions, pneumatic pumps, and leaks from well sites, gathering and boosting stations, and compressor stations. In developing new standards, EPA says it will focus on in-use technologies, current industry practices, emerging innovations and streamlined and flexible regulatory approaches to ensure that emissions reductions can be achieved as oil and gas production and operations continue to grow.

How would the EPA’s proposed methane actions complement existing regulation?

In April 2012, the U.S. Environmental Protection Agency (EPA) finalized new source performance standards (NSPS) and hazardous air pollutant regulations for oil and gas production and gas processing, transmission, and storage facilities. While primarily aimed at reducing smog-forming and toxic air pollutants, known as Volatile Organic Compounds or VOCs, the rules also had the indirect effect of reducing methane emissions, and the proposed rule in August 2015 would have these rules apply directly to methane as well. These rules include the requirement to use "green completions" at natural gas wells to limit emissions from hydraulic fracturing, a rapidly growing means of drilling and production. In a “green completion,” special equipment separates hydrocarbons from the used hydraulic fracturing fluid, or “flowback,” that comes back up from the well as it is being prepared for production. This step allows for the collection (and sale or use) of methane that may be mixed with the flowback and would otherwise be released to the atmosphere. Because the same technologies in place to reduce VOC emissions would also be used to reduce methane, no additional steps are necessary to reduce methane.

In its January 2015 announcement, EPA said it will develop new guidelines to assist states in reducing VOCs from existing oil and gas systems in areas that do not meet the ozone health standard and in states in the Ozone Transport Region. Like the earlier NSPS, these guidelines will also reduce methane emissions.

The proposed regulation of August 2015 will extend emission reductions further downstream from the 2012 rules and cover certaun equipment used in the natural gas transmission sector in addition to equipment covered by regulation in 2012.

What other non-regulatory steps has the administration announced it will take?

The president will request $15 million for the Department of Energy (DOE) to develop and demonstrate more cost-effective technologies to detect and reduce losses from natural gas transmission and distribution systems, including leaks repairs and developing next-generation compressors. The president’s budget will also propose $10 million to launch a program at DOE to enhance the quantification of emissions from natural gas infrastructure for inclusion in the national Greenhouse Gas Inventory in coordination with EPA. Congress must appropriate funding for these programs for them to be implemented. DOE will also be responsible for other recommendations to reduce emissions from the natural gas system.

Applying the Energy Service Company Model to Advance Deployment of Fleet Natural Gas Vehicles and Fueling Infrastructure

Applying the Energy Service Company Model to Advance Deployment of Fleet Natural Gas Vehicles and Fueling Infrastructure

June 2014

by Matt Frades

Download the full paper (PDF)

This paper explores the opportunity for using ESCO-style service contracts to advance investment in natural gas vehicles by fleets. Starting with a brief overview of the ESCO market, this paper explains how ESCOs reduce barriers faced by energy efficiency and cost savings projects, presents case studies that demonstrate how some of the features of ESCOs are being employed in cutting-edge NGV fleet projects, and explores how these features could be incorporated into innovative business models that reduce the barriers to NGV fleet project investment. 

 

Matt Frades
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Alternative Fuel Vehicle & Fueling Infrastructure Deployment Barriers & the Potential Role of Private Sector Financial Solutions

Alternative Fuel Vehicle & Fueling Infrastructure Deployment Barriers & the Potential Role of Private Sector Financial Solutions

April 2014

by Sarah Dougherty and Nick Nigro

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This paper examines how private financing can address the barriers to demand facing electric, natural gas, and hydrogen fuel cell vehicles and their related fueling infrastructure. Starting with a review of the state of the market, it covers significant barriers to market demand and barriers for private investors and concludes with a review of innovative finance options used in other sectors that could be applied to the alternative fuel vehicle market.

 

Nick Nigro
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Leveraging Natural Gas to Reduce GHG Emissions

A comprehensive analysis by C2ES concludes that increased natural gas use can help reduce U.S. greenhouse gas emissions in the near to medium term, but deeper long-term reductions will require broader deployment of other low-carbon energy sources as well.

"Leveraging Natural Gas to Reduce Greenhouse Gas Emissions" examines the climate challenges and opportunities posed by the current natural gas boom. The report synthesizes information from a series of background papers and workshops in Houston and Boston attended by several dozen experts and representatives of industry, environmental organizations, and state agencies

Among the report’s key findings:

  • U.S. greenhouse gas emissions are back down to mid-1990s levels, in part because electricity generators are using more natural gas, which emits half as much carbon dioxide as coal. Further reductions can be achieved by substituting natural gas for coal and oil in the transportation, manufacturing and building sectors.
  • Simply substituting natural gas will not achieve the deeper emissions cuts needed in the longer term.  Zero-carbon energy sources such as solar, wind and nuclear are critical.  Strong support also is needed to perfect and deploy technologies to capture carbon emissions from coal- and natural gas-fired power plants and bury them underground.

The potential climate benefits of increased natural gas use can be maximized only if further steps are taken throughout the natural gas system to reduce leaks of methane, the principal component of natural gas and a potent greenhouse gas.

Read the report summary.

Read the full report.

 

Following is a summary of opportunities and challenges identified in the report, and key next steps:

Opportunities

  •     Increased direct use of natural gas in homes and businesses by replacing certain electric appliances, such as space and water heaters, with natural gas models.
  •     Reduced reliance on petroleum and reduced emissions by substituting natural gas for diesel and gasoline in fleets and heavy-duty trucks.
  •     Manufacturing growth with reduced emissions by using natural gas in more efficient combined heat and power systems.
  •     Expanded use of natural gas-powered fuel cells and microturbines producing efficient, on-site energy that makes use of waste heat.

Challenges

  •     Funding expensive infrastructure to deliver natural gas to more homes and businesses.
  •     Ensuring that natural gas complements -- not crowds out -- zero-carbon energy such as nuclear, wind, and solar.
  •     Overcoming regulatory hurdles and a lack of incentives for on-site (distributed) power generation.
  •     Identifying and addressing methane leaks from the production, transmission, and distribution of natural gas.

Next steps

  •     Educating consumers about the full-fuel-cycle efficiency of natural gas appliances.
  •     Encouraging innovative funding models and incentives to extend natural gas lines to consumers and promote on-site power generation.
  •     Informing manufacturers about the increased efficiency and resilience of combined heat and power systems.
  •     Aligning state policies to overcome perceived conflicts between utilities and combined heat and power operations, encourage development of distributed generation technologies such as microturbines, and address the high cost of expanding natural gas infrastructure.

Additional Resources:

 

Video of our launch event

Remarks by Eileen Claussen and Michael Webber

CEO-Level Discission on the greenhouse gas reduction benefits of natural gas

All Energy Sources Entail Risk, Efficiency a No-Brainer

At the moment, our attention is riveted by the events unfolding at a nuclear power plant in Japan. Over the past year or so, major accidents have befallen just about all of our major sources of energy: from the Gulf oil spill, to the natural gas explosion in California, to the accidents in coal mines in Chile and West Virginia, and now to the partial meltdown of the Fukushima Dai-ichi nuclear reactor. We have been reminded that harnessing energy to meet human needs is essential, but that it entails risks. The risks of different energy sources differ in size and kind, but none of them are risk-free.

Coverage of Natural Gas Emissions & Flows Under a GHG Cap-and-Trade Program

Coverage of Natural Gas Emissions & Flows Under a GHG Cap-and-Trade Program

Prepared for the Pew Center on Global Climate Change
December 2008 

By:
Joel Bluestein
Senior Vice President, ICF International

Download entire white paper (pdf)

This paper provides an overview of the different point-of-regulation options for covering greenhouse gas emissions
from natural gas under a cap-and-trade program. The paper assesses the percentage of emissions covered under the different options and the type and number of entities and facilities regulated.

 

Overview

Greenhouse gas (GHG) emissions associated with natural gas make up nearly 18 percent of total U.S. GHG emissions.1 Regulation of GHG emissions from the natural gas sector under a cap-and-trade program presents challenges different from those associated with coal or petroleum for several reasons:

  • End users of natural gas number in the millions and include not only large industrial facilities and electricity generators, but also a wide variety of smaller users in the commercial and residential sectors.
  • Although the principal GHG concern for the sector is carbon dioxide (CO2) emissions from natural gas combustion, the sector also generates non-energy CO2emissions and fugitive emissions of methane (CH4), which are difficult to measure and monitor.2
  • There are a number of different types of entities in the natural gas supply chain from production to end use making it difficult to apply the standard upstream vs. downstream dichotomy traditionally used to think about the point of regulation for petroleum and coal under cap-and-trade programs.
  • Both physical possession and, in many cases, ownership of the natural gas commodity change multiple times within the value chain as natural gas moves from producers to end-use consumers.

These factors have made the treatment of natural gas a challenging issue in the design of a federal economy-wide GHG cap-and-trade program.3 Bills introduced in Congress have reflected a range of different approaches.4 Even different versions of the Lieberman-Warner bill (S. 2191) incorporated different approaches.

A particularly important design issue is whether to directly regulate GHG emitters or to regulate firms for the embedded emissions of the fossil fuels that they produce, process, transport, or distribute.5 For fossil fuels like natural gas, embedded emissions are the GHG emissions that will ultimately be emitted once the fuel is combusted (see box below for a discussion of the direct vs. embedded emissions and upstream vs. downstream points of regulation). A point of regulation for natural gas coverage under cap and trade that regulates embedded emissions would cover emissions by end users indirectly through the regulation of entities/facilities that produce, process, transport, or distribute natural gas.6 Under a cap-and-trade program, these entities/ facilities would be required to acquire and retire emission allowances equal to their embedded emissions—i.e. the CO2emissions from combustion of the natural gas that these entities/facilities produce, process, transport, or distribute. In theory, entities regulated for their embedded emissions would pass the cost of allowances on to consumers of natural gas thus providing the same economic incentive for emission reductions on the part of emitters as would a cap-and-trade program that regulated direct emissions.7

The reason for interest in regulating embedded emissions is that it may be possible to, in effect, cover the direct emissions of many diverse emission sources by regulating the embedded emissions of relatively few entities that produce, process, transport, or deliver fossil fuels. For example, GHG emissions from many millions of motor vehicles could be covered under cap and trade via regulation of the embedded emissions of approximately 150 U.S. oil refiners plus some importers of fuel. That said, there is concern as to whether in practice the price signal established by regulating embedded emissions is an efficient or effective way to ensure GHG reductions from end users.

In considering the point-of-regulation options, one must consider what percentage of GHG emissions from the natural gas sector each option would cover and how many and what kinds of entities/facilities would need to be regulated. The latter question is important from the perspective of allowing for the accurate measurement of direct emissions by regulated entities/facilities or embedded emissions from natural gas produced, processed, transported, or distributed by regulated entitities/facilities. Moreover, all else equal, a cap-and-trade program that limits the number of entities/facilities that must be monitored for compliance limits the associated administrative costs borne by government and industry. One should also consider the efficiency with which different point-of-regulation options achieve emission reductions because of differences in compliance options and responsiveness to price signals among entities at different points along the natural gas value chain. This last question is the subject of a forthcoming paper.

The following sections of this paper review the emissions profile of the natural gas sector, identify the key entities and associated facilities in the natural gas supply chain, provide an estimate of the emissions coverage and number of entities and facilities regulated under various point-of-regulation options, and provide a summary of the analysis.

About the Author

Joel Bluestein is Senior Vice President of ICF International and is a nationally recognized expert on the impacts of environmental and energy regulation with over 30 years of experience in the energy and environmental arenas. Prior to 2007, he was President of Energy and Environmental Analysis, Inc., now an ICF International company, which was nationally known for its analysis of natural gas supply, transportation, and market issues and provided strategic planning and regulatory support to all segments of the natural gas industry. 

Mr. Bluestein has been directly involved in the development of emission trading programs and participates in the national debate on new environmental policies and their energy implications. He has testified before the Senate Environment and Public Works Committee on natural gas supply issues and their implications for multi-pollutant regulation of the electric generating sector. His work has included technology and market assessments, R&D planning, energy conservation project analysis, and long-term energy demand forecasting. He holds a degree in Mechanical Engineering from the Massachusetts Institute of Technology and is a registered Professional Engineer.

Joel Bluestein
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