Energy markets may now be awash in natural gas but the fuel has, well, fueled an economic boom in the United States. Not only has it changed the way electricity is generated but it has also given the manufacturing sector here a critical edge. Anything standing in its way? Excessive methane releases could block progress.
And that’s why US Environmental Protection Agency Administrator Gina McCarthy focused on the problem during her speech this week to IHS CERAWeek in Houston. There, she said such releases, which are 25-times more potent than carbon dioxide, are greater than originally thought. But she quickly added the Obama administration is providing flexibility to drillers when it comes to cutting those emission rates.
“The proposed standards present a common-sense way to make sure that as the natural gas industry continues to grow. We’re doing what we can to reduce methane pollution,” McCarthy said. “And the proposed standards are cost effective by design – they’re built to reduce pollution that’s fueling climate change while supporting responsible energy development at the same time.”
“The new information shows that methane emissions from existing sources in the oil and gas sector are substantially higher than we previously understood,” she continued “So the bottom line is – the data confirm that we can and must do more on methane.”
To be exact, the Obama administration says that methane emissions accounted for nearly 10 percent of US greenhouse gas emissions in 2012, of which around 30 percent came from the production and the transmission and distribution of oil and gas. And while those releases are down by 16 percent from 1990 levels, the EPA says that they are expected to rise by 25 percent by 2025 unless something is done.
EPA’s methane proposal would require oil and gas producers to cut such emissions from 2012 levels by as much as 45 percent by 2025. That is in their interest, given that developers can sell that “wet gas” to chemical and manufacturing facilities that use it as a feedstock for their processes.
To be clear, dry natural gas can be used for electric generation. Wet natural gas, or natural gas liquids that include ethane, butane and propane, are separated from the dry gas. Those elements are then used as feedstocks in the manufacturing and chemical processes to make universal products, like fertilizers.
Because of the advent of hydraulic fracturing, or fracking, developers are able to access the shale gas — unconventional natural gas — a mile or more beneath the earth’s surface where it is embedded in rocks. While the friction between producers and ecologists is heated, there is now a plethora of natural gas, which means that the US is paying half of what they do in Europe and a third of what they pay in Asia.
Indeed, the shale gas revolution is marching on and creating jobs and prosperity in its wake — nearly 3 million new U.S. jobs by 2020, of which 1.7 million will be permanent, says consulting firm McKinsey and Company. Those benefits are dispersed around the United States but they have been especially fruitful for the Gulf Coast and the Marcellus Shale region, where 20 percent of the nation’s natural gas production now takes place.
At present, more than 180 chemical industry projects that are worth $117 billion have been announced, says the American Chemistry Council. That includes new plants and expansions of existing ones from companies based all over the world that want access to inexpensive gas.
But this expansion could be threatened by excessive methane releases. How is industry doing?
Much of the oil and gas sector has taken steps to be responsible, trying to control the levels of methane that escape from their wells and pipes. And to a large extent, it has been successful, although the Obama administration says that more can be done. It adds that preventing leaks so that the escaping natural gas could be captured and resold could increase industry’s revenues by as much as $188 million a year.
Roughly 375 billion cubic feet of methane has entered the atmosphere over five years, ending 2014, says the US Department Interior. If that methane is captured and resold, it could not just cut the level of heat-trapping emissions but it could also go to productive use by helping heat homes and businesses.
A General Accountability Office study adds that 40 percent of that could be captured, meaning that investments in current technologies could easily pay off.
“The goal is to prevent emissions, not impede U.S. energy production,” says Eric Milito, director of industry operations for the American Petroleum Institute. He adds that methane emissions are already falling and that further regulations would jeopardize the energy revolution here.
Here’s the industry’s challenge: If those fracking and other operations allow more than 3.2 percent of the methane they produce to escape, then the benefits of switching from coal to natural gas are lost, according to Princeton University.
So how much methane escapes? Anywhere from less than 1 percent to more than 8 percent, depending on how it is calculated and who is doing the calculating.
“I think most people would agree that we should be using our nation’s natural gas to power our economy – not wasting it by venting and flaring it into the atmosphere,” said Secretary Sally Jewell, referring to the Interior’s Bureau of Land Management proposed rule.
Manufacturers and chemical makers would second that. They are depending on the natural gas to fuel their operations and the byproducts to expand their operations, all of which has accelerated the US economic recovery.