Methane Emissions Intensities: Sorting Through the Options for Oil and Gas

Importance of Methane Intensity

President Biden highlighted the impact of methane emissions on climate change at the Conference of Parties 26 (“COP26”) talks in October. The effect of methane emissions is further demonstrated by a proliferation of mandatory and voluntary programs to limit methane emissions throughout the oil and natural gas supply chains. Particularly critical for oil and gas operators, “methane intensity” is becoming a preferred approach for communicating methane emissions data and performance throughout the industry. Currently, there is no universal standard methodology for calculating methane intensity. The lack of methodology is an obstacle to managing, tracking, and transparently communicating endeavors to reduce methane emissions. This article provides information to assist oil and gas operators in understanding and making decisions about measuring and reporting methane intensities.

Methane emissions intensity is a measure of methane emissions relative to natural gas throughput, also referred to as the methane intensity rate. This measures the methane component of natural gas emissions relative to the methane component of natural gas produced in the natural gas system. Intensity is becoming a preferred approach for communicating methane emissions data throughout the oil and gas industry for two primary reasons:

• It enables a comparison of performance between similar business operations within a company or between different companies which is not reflected when comparing total methane emissions.
• It can track performance over time to meet Environmental, Social and Governance (“ESG”) targets and communicate progress.

Multiple voluntary ESG reporting standards (for more information on SASB, TCFD, AXPC ESG, etc., please refer to How to Surf the ESG Wave) address methane intensity. These ESG standards rely on various methodologies and protocols, including the Greenhouse Gas Protocol (“GHGP”), the Natural Gas Sustainability Initiative (“NGSI”) created by the American Gas Association, and the regulatory framework provided by the Environmental Protection Agency (“EPA”) in the Mandatory Greenhouse Gas Reporting Program (“GHGRP”) and the Greenhouse Gas Inventory (“GHGI”). There are also voluntary reporting initiatives that primarily target natural gas operators, including One Future. There is also an increasing number of certifications for methane intensity provided by private companies and third parties; keep an eye out for additional Spirit articles on this topic.

Methane Intensity Differences

The primary differences in the various protocol intensities are what is included in the numerator (which sources, how the methane emissions are categorized) and the denominator (production of natural gas versus methane component, total CO₂e emissions). Table 1 summarizes some key differences; for more specifics on emissions sources included in each please reach out to Conor Merrigan.

How Methane Intensities Relate to ESG Frameworks and Emissions Protocols

Under the SASB framework, the focus is not related to production per se, but is the methane portion of the overall CO₂ equivalent emissions under a company’s total GHG equivalent emissions. The intensity is expressed as a percent of the total emissions using methane’s weighted global warming potential. It therefore demonstrates the contribution of methane to a company’s direct greenhouse gas impact. While SASB is most often used today to share reported direct or Scope 1 GHG emissions and related emissions under the EPA’s GHGRP (allowing for ease of comparison of operator metrics), the standard technically calls for the use of the GHGP, which is the most inclusive protocol requiring all reasonable emission sources are accounted for. It is important that companies reporting under SASB provide appropriate footnotes for this metric for this reason.

The NGSI protocol underlies many other reporting systems. It uses emission sources prescribed in EPA’s standard reporting methodology (GHGRP) as reported in the Electronic Greenhouse Gas Reporting Tool (“e-GRRT”) plus additional sources and includes all facilities regardless of whether they fall under the GHGRP’s 25,000 mTCO₂e reporting threshold or not. The emission sources which the protocol requires accounting for are detailed as part of the Methane Challenge Program, which is an innovative partnership of government and industry within the EPA’s Natural Gas STAR program. The NGSI protocol offers operators the opportunity for a more accurate accounting of their methane emissions by including sources such as blowdowns and floating roof tanks, which the GHGRP program does not capture.

The AXPC framework uses the conventional definition of natural gas (as opposed to methane fraction of natural gas) production for the denominator of the methane intensity calculation. Operators will use the same gross yearly production for the NGSI method as they report to the EPA through the GHGRP. Since NGSI looks at the methane portion only, companies reporting under the AXPC and NGSI methods would use two (2) different production values in each intensity calculation. In this case, the NGSI method would have a smaller production value (and greater intensity) since methane does not comprise 100% of the gross natural gas produced by any one company. According to One Future, the average volume of methane in delivered natural gas in the US equals 83.3% for production and gathering and boosting facilities.

Additional Considerations

There are additional considerations in calculating specific methane intensities that can range from volume adjustments from particularly hot or cold years, to accounting for non-emissions related discrepancies properly, to appropriate throughput calculation methodology for specific elements of the natural gas system. This topic is very much top of mind for the natural gas value chain (production through distribution) as well as becoming an increasingly important aspect for even the more targeted oil plays and that value chain. Please reach out if you’d like more information on how best to incorporate these changes into your company’s strategy.