3 reasons oil and gas companies should embrace the new methane rule

Ben N. Ratner

A massive wave of market and societal forces is changing the oil and gas industry.

Low commodity prices are driving out weaker players with excessive debt and forcing survivors to become more efficient. And as the impact from rising global temperatures worsens and countries move to fulfill their commitments under the Paris climate agreement, public scrutiny of oil and natural gas companies is intensifying.

The question is not whether the industry will change to meet these challenges – it’s how it will change. It’s about what opportunities could propel industry to come back stronger from the depths of the commodity slide.

Ultimately, it’s about how it will become a leaner, cleaner industry that can play a meaningful role as nations work to transition to lower-carbon economies.

Here’s the good news: The methane standards the Environmental Protection Agency finalized last week should help oil and gas companies get there because these standards can:

1. Rebuild public trust in industry

The energy sector is among the least trusted in the business world, ranking only above financial services and pharmaceuticals, according to the 2016 Edelman Trust Barometer. Performance across the industry varies widely, but consumers only see the bad actors getting headlines when leaks or accidents occur.

As with any industry, trust can be rebuilt. But it’s going to take fresh effort from operators to curb emissions sector-wide – and to communicate methane management commitments in an open, consistent and verifiable way.

The country’s first-ever national methane limits begin to level the playing field across the industry and set a benchmark for responsible production. Because the rule shows what companies must do to contain emissions from new wells and other sources, it can inspire public confidence that operators are, in fact, working to solve the problem.

2. Keep product in the pipe and save money

The latest United States inventory shows more than 9 million metric tons of oil and gas methane emissions, packing the same climate impact over a 20-year timeframe as do more than 200 coal-fired power plants. That’s a lot of methane – and wasted natural gas – no matter how you slice it.

A similar rule that took effect in Colorado last year demonstrates the benefits companies realize when identifying and fixing methane leaks.

In a new report from the industry group Center for Methane Emissions Solutions, 70 percent of companies reported that the monetary and other benefits of curbing methane leaks outweighed the costs.

Colorado’s law, which is in many ways comparable to the new federal rule, is also increasing workers’ attention to detail and prompting them to find several methane leaks per inspection, the study found. Most can be fixed in just a few days.

3. Drive new technology and industry efficiencies

And there’s more: Collaborations such as the Methane Detectors Challenge are catalyzing new advances in methane detection technology that cut more emissions at less cost.

The new systems emerging from the Challenge and the broader market will automate the leak detection process and help operators identify leaks faster, bringing down labor costs and reducing product waste and pollution even more.

Importantly, the EPA rule includes a pathway to innovation that will send a strong demand signal to the marketplace to further accelerate innovation of methane tools –  which  can help industry boost efficiency.

Some industry trade groups still argue against a triple-win like this. The question is, why?