New market implications such as the Inflation Reduction Act (IRA), have made the entire supply chain, from producers, pipelines and infrastructure owners to downstream buyers keenly aware of how fast the energy transition is accelerating. This new legislation combined with the prospect of emerging, long-term energy partnerships with the European market has created a significant new opportunity for oil and gas in the United States, which is now certified as clean and certified.
Like consumers shopping in a grocery store, some choose to buy organic vegetables or free-range eggs for their families vs. “conventional” choices, the energy industry’s consumption standard is changing. Pressure for verified low-methane fuel has driven operators to adopt solutions that will boost sustainable operations is coming from all angles — regulators, investors, next-gen employees and consumers. As the United States and the global economy continue its clean energy transition, oil and gas operators are looking to innovative technologies to shepherd them into the next era of the transition.
What is RSG?
Responsibly sourced gas (RSG) is produced natural gas that has undergone a third-party assessment of an operator’s environmental stewardship and operational excellence. Most certifiers in the market today evaluate impact across air (methane intensity), land, water and community. Only Project Canary continuously monitors and measures methane leak rates. In the four years since the first RSG deal was done, certified gas has become a differentiated commodity class whose production is verified by these independent auditors to meet pad and basin level criteria for an increasing number of environmental attributes. While the market has not yet fully aligned on a complete definition of the minimum criteria for certification, natural gas buyers are increasingly demanding lower methane intensities, continuous monitoring (not estimates), and proof of responsible water use. S&P Global Platts anticipates that 20 percent of the total gas volume produced in the United States will be certified low methane by the end of 2022, with major players in the Marcellus, Haynesville and Rockies basins leading the way.
Investors, consumers and operators are looking to differentiate their natural gas molecules as early movers in the emerging measurement economy and those with a close eye on the new IRA bill. Reducing methane emissions from natural gas production is one of the most impactful ways to limit the effects of climate change because of its potency as a short-lived greenhouse gas. The Clean Air Task Force estimates that methane, because it has more than 80 times the warming power of carbon dioxide over a 20-year time period, accounts for a quarter of today’s global warming, with levels in the atmosphere continuing to surge. The International Energy Agency recently updated the Global Methane Tracker stating that due to the elevated price of natural gas today, nearly all of the options producers can implement to reduce emissions on their systems can be implemented at no net cost. Now is the time to make these investments. To prove the value of the investment and prove the methane emissions reduction, Project Canary believes continuous monitoring technology is an easy, low-cost way to manage positive change over time and ensure the long-term viability of natural gas as a ubiquitous, affordable energy source.
Continuous Emissions Monitoring
Project Canary, headquartered in Denver, Colorado, is the leading certifier of responsible operations and verified climate data (RSG) and insights throughout the energy supply chain. The company provides science and technology-backed emission profiles for participating companies using continuous monitoring technologies and per-well assessments alongside sensor choices, as long as the data feed is robust.
Project Canary’s measurement devices, known as “canaries,” are installed at production pads and then synced with a real-time dashboard, allowing operators to track methane emissions, identify possible leaks and provide accurate, measurable data to their production.
Buyers and investors are pushing the responsibly sourced gas market and looking for a premier market solution based on measured climate attributes. As a company seeking to change the market, Project Canary understands that attributes drive the industry forward and is highly active in the EU and U.S. markets. Recently, Project Canary announced that it is increasing its collaboration in Europe by joining Eurogas and working with various European gas companies. For example, Project Canary’s recent partnership with Kellas to deploy its continuous emissions monitoring at its Teesside Central Area Transmission System (CATS) terminal and also working with Engie and Uniper to connect them with U.S. gas producers such as Next Decade and Southwestern.
“The oil and gas industry has the technology and tools to curb methane leaks and impact climate change drastically – but companies must commit to accurate, facility-level emission profiles,” said Project Canary CEO and cofounder Chris Romer.
According to a recent environmental study by Boston Consulting Group, over 90 percent of companies aren’t measuring their emissions correctly. Only 9 percent of companies surveyed possessed the technology to frequently track methane emissions, while large percentages of companies admitted to high error rates or not tracking their methane activities at all.
“Project Canary can help lead a revolution for accessible and deployable technology that can help producers cut emissions, count emissions and prove it in a way that won’t disrupt energy markets,” Romer said.
Romer argues that Project Canary’s Upstream Certification and continuous monitoring technology gives companies the ability to develop a credible path to reduce methane emissions. Then, producers can differentiate their natural gas molecules for the market based on climate performance mandates while allowing buyers the ability to meet their desired environmental commitments.
State of the Market
Southwestern Energy was an early mover, becoming the first E&P to install continuous monitors and certify its assets in its Appalachian and Haynesville assets in 2018. As a result of its market leadership, the company recently announced a long-term RSG supply agreement with Uniper, one of Germany’s largest utilities and major gas importer. Others, including Civitas Energy, Bayswater, PureWest, Laredo Petroleum, Olympus Energy and PennEnergy, have shown the value of independently certified RSG.
Dozens of gas utilities have begun to participate in the RSG market by issuing RFIs and RFPs, piloting small volumes over short periods of time and gradually increasing engagement as policy-makers and regulators join them on this rapidly evolving methane journey. Xcel Energy, for example, has sourced RSG from its Colorado assets and made a voluntary commitment to procure 100 percent RSG by 2030 for all of its gas-fired power plants as well as its distribution system customers. Engie, the French utility and major global gas buyer has led RSG transactions, including sourcing RSG via NextDecade’s planned LNG terminal in southern Texas.
“Engie is committed in our fight against the energy and climate challenges facing the world today,” said Ken Robinson, president of Engie Energy Marketing. “We expect continued expansion of these new markets as part of the response to the energy transition. More transparency and collaboration will foster more innovation, allowing this industry to contribute positively to reduce CO2 emissions and transition to a low-carbon future.”
Recently, Robinson mentioned seven principles to evaluate certified RSG natural gas purchases made from U.S. producers. Engie is a leader in the market and Project Canary believes that many European buyers will follow their principles.
As market and community pressures increase for decarbonization, operators across the supply chain face unprecedented pressure to define net zero emission targets and back up those targets with proof of performance. Project Canary provides the environmental data to deliver the proof.
“It’s better for our climate, and it’s good business,” said Romer. “Consumers are willing to pay a premium for the peace of mind that their RSG molecules have been meticulously measured, tracked and reported to meet the toughest performance goals.”
While upstream producers have led the charge in RSG certification, Project Canary has already expanded into certifying infrastructure and LNG export assets. Tallgrass Energy entered into an agreement with Project Canary in September 2021 to create the nation’s first certified interstate natural gas transmission system. By working to complete Project Canary’s certification process focused on environmental stewardship across its entire operating footprint, Tallgrass’ Rockies Express Pipeline (REX) is poised to be the first pipeline in the United States to differentiate carbon neutral transportation capacity.
At the time of the announcement, Tallgrass president Matthew Sheehy said, “Customers want assurances that natural gas is produced responsibly and being transported via low emissions pipeline systems.”
This partnership could represent the continued evolution of how RSG and best practices can extend throughout the supply chain to decrease greenhouse gas emissions across the entire oil and gas industry — or, as Sheehy emphasized, “leading the way to a sustainable future.”
“RSG serves as an important component of the energy transition to address the triple challenge of the need for energy security, access to affordable energy and a cleaner commodity,” said Romer.
Tags: September October 2022 Print Issue
This article was submitted by Project Canary, one of the fastest-growing companies in ClimateTech analytics and provider of RSG certification.