The White House Office of Domestic Climate Policy has just released its US Methane Emissions Reduction Action Plan, laying out several steps that can be taken to reduce the amount of methane leaked from oil and gas wells and pipelines. Operators, midstream, and utility companies alike will be affected by these rules, so here is what they all must know about the Action Plan.
Why is Methane Worse than C02?
First and foremost, methane has 20 times more climate impact over its lifetime in the atmosphere than carbon dioxide. One of its largest sources is natural gas extraction, but methane escapes from many other industries including agriculture, coal mining, pipeline transport, wastewater treatment plants and even landfills. While there are still some questions about how effective methane reduction programs will be across industries, one thing is clear: The US government is giving no breaks to the oil and gas industry.
What Operators Need to Know
The rules for operators mostly focus on repairing old infrastructure and building new infrastructure up to standards. Methods like improved well liquids unloading and natural gas-driven intermittent vent pneumatic controllers will be implemented to achieve this. The greatest source of methane emissions from wells comes from leaks whether that is simply parts wearing out over time or gas vented in moving parts. Still, not all wells are equal polluters. It will be up to operators to use existing leak detection programs to target their greatest methane offenders. This will likely cost a good deal of money on the operations side, so hopefully, the current $80 barrel is enough to support the cost of repairing as operators won’t really have a say in whether or not they want to pursue these options. Flaring will also be more difficult to do under these rules, so it is likely that cryptocurrency mining rigs may be an attractive option for operators looking to dispose of some excess gas.
What Midstream & Utility Need to Know
Midstream and utility companies are the primary owners of millions of miles of pipe in the united states delivering natural gas to the homes and commercials properties that need it for heating and cooking. Not only that but there are even more pipelines associated with refining or other industrial processes. This is why the government is looking to repair small leaks in these systems by implementing new standards for operational better shut-off valves. Often times pipelines are so old that they have corroded or developed leaks where the gas will escape from the pipeline and enter the soil. While some gas finds its way back into the pipeline through some channel of soil and another leak, a decent portion of this gas is actually emitted from soil or asphalt depending on the environment it is in. It seems that an overhaul of these legacy systems may prove to be the best option for companies looking to get these pipelines up to snuff.
Plugging and Abandonment
It seems that there will be a new opportunity for many workover companies in the sense of P&A. There are hundreds of thousands of orphaned wells across the country that are deemed “super emitters.” They emit so much methane simply because the infrastructure has degraded over time giving way to leaks. The government hopes to address which wells are the biggest emitters and do their best to properly abandon them. Going forward, it is likely that regulations will be set in place to make sure adequate funds are fronted for each site to make sure the abandonment cost is taken care of by the operators rather than local or federal governments.
A Very Likely Outcome of Increased Energy Prices
At the end of the day, repairing facilities, improving pipelines, and abandoning decades-old wells will be pricey. While the government has set aside a decent amount of funds in the “Build Back Better” Act, it is still going to require a lot of money from non-government parties. This cost is likely going to be passed down to consumers and it won’t be cheap. The money has to come from somewhere after all. While all of these practices will work to reduce methane emissions, it is likely going to exacerbate the existing problem of energy inflation.
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