Forget a Fracking Ban
The key to greening the energy industry is getting better at pinpointing which natural gas firms and states are acting responsibly—and which aren’t.
The French government’s decision late last year to block a $7 billion-dollar deal between Engie, a French partially state-owned energy enterprise, and NextDecade, a U.S. liquefied natural gas (LNG) company, is only the latest setback for U.S. producers struggling to find their footing. It might also be the one that changes the oil and gas industry forever.
Nixing the deal because the gas is “too dirty,” the French government has echoed environmental concerns over the role that oil and gas will play in a low-carbon energy future. With the European market thoroughly intertwined, and Engie positioning itself to serve as a natural gas middleman for other countries, France decided they could not risk their reputation over the “environmental impact and controversies” linked to U.S. oil and gas.
These doubts do not come at a good time for the industry, which has recently seen dipping oil and gas prices, significant layoffs and bankruptcies, regulatory changes, investment challenges, and intense societal and shareholder pressures to align with global climate goals. This latest hit is particularly devastating for at least two reasons: It has significant environmental implications; and it could rapidly change the energy security landscape.
On the environmental side, natural gas can claim considerable credit for lowering carbon-dioxide emissions from electricity generation in many places. It has replaced coal as the fuel of choice in the power sector, and it has helped to diversify U.S. energy sources. On the foreign policy side, many in the Senate and White House touted exporting LNG, especially to Europe, as a way to compete with Russian and Middle Eastern piped gas. They even referred to LNG as “freedom gas,” the next great American export.
Now, with Ireland and Germany also quashing U.S. LNG interests, it’s not clear how rosy it’s future is.
For years, environmentalists have challenged the long-term viability of natural gas to act as a low-carbon fuel due to the methane emissions associated with its production and distribution. By various measures, methane is 28-84 times worse than carbon dioxide—the greenhouse gas primarily responsible for climate change. As liquified natural gas is also 85-95 percent methane by composition, environmentalists haven’t had to be very creative with their arguments. Despite these facts, the campaign to make natural gas a major part of the U.S. energy mix was well established under former U.S. President Barack Obama, who called it “the bridge fuel that can power our economy” during a State of the Union Address, and passed numerous regulations to ensure it would survive growing environmental standards.
In 2017, just two months after taking office, his successor, outgoing President Donald Trump, released an executive order to remove all regulatory “burdens” from oil and gas production. The order aggressively sought to undo many of the environmental regulations set by the previous administration, most notably the requirement to monitor and fix methane leaks. The removal took time to implement, and its effects on production are relatively unknown, but it very clearly announced the United States’ position on environmentalism and drew attention to its floundering policies. Other policymakers and even some of the world’s largest energy companies fought against the move, knowing that the environmental consequences would be dramatic and would ultimately hurt the reputation of U.S. energy producers. They were ignored.
In response, some states have taken measures into their own hands. Even before Trump changed federal environmental requirements, Colorado implemented its own methane regulations to show that it was taking the issue seriously. The state has recently moved towards banning routine flaring—the process by which methane is released and burned at fracking sites—to try to bring the oil and gas industry further into the 21st century. Many other states have also started to limit flaring and venting as they try to regulate the oil and gas industry, but with each having its own objectives, this is not an easy task.
Texas for example, the largest producer of both crude oil and natural gas, does not have stringent regulations. The state has numerous exemptions for flaring and directly releasing methane and other toxic gases into the atmosphere. In 2019, it issued close to 7,000 flaring and venting waivers, and it has never in its history denied an application to flare natural gas, even, in one case, when a company was already connected to a system that could take the gas away without spewing it into the atmosphere.
Texas’s flaring practices might well have been the reason for the French government’s decision. Although not explicitly mentioned, its report states that flaring has become “a major source of negative attention for gas production globally and for Permian oil producers in particular.” The Permian is also referred to as the West Texas Basin, and the incredible volume of burned gas—visible from space—has moved the United States from fourth to third place, after Russia and Iran, among the world’s top offenders.
As Biden prepares to take office, he’s likely looking for ways to roll back some of Trump’s measures and get the industry back on track. The progressive wing of the Democratic party has urged him to ban fracking entirely, but this is nearly impossible from a legal standpoint and short-sited from a policy perspective. Global demand for natural gas is only expected to increase in the coming years, and as oil and gas production already accounts for 1 percent of the U.S. economy, it is unknown if renewables would be able to immediately fill that gap.
Even a ban of fracking on public lands (Biden’s current plan) is looking like more like a political move than one meant to address the development of an industry. In 2018, sale of oil and gas produced from federal lands accounted for only 8 and 9 percent of U.S. totals. From an environmental standpoint, this is only a drop in the bucket when Texas produces more oil and gas than 95 percent of the world’s countries and might be leaking more than three times more methane than it says it is. Instead, the ban should be viewed as strategic move by a president who has promised climate progress to a constituency that has already written off oil and gas. Still, the French government’s latest move gives the skeptics considerably more ammunition, and with climate change at the forefront of everyone’s minds, it is clear that something needs to be done.
To preserve the industry for the future—most models show stable demand globally for the next few decades—and to ensure that coal continues to be phased out, the nation needs to further develop the concept of responsibly sourced gas.
It has been difficult to pinpoint the real environmental impacts of natural gas because of the complexities of its supply chain. The production of U.S. natural gas encompasses hundreds of thousands of wells, hundreds of processing facilities, and well over a million miles of pipeline. When combined with the 9,000 independent oil and gas producers in the United States, the different corporate strategies, and all of the variables that come with state regulations, the idea of mapping the supply chain—and seeing where the pollution is coming from—can be a daunting.
Fortunately, there are obvious starting points for addressing this problem. The U.S. Environmental Protection Agency has investigated natural gas supply chains to find that distribution, storage, and processing have all seen 40-70 percent decreases in methane emissions since the 1990s. These reductions, while impressive, have been offset by the 41 percent increase in emissions from the oil and gas companies actually getting the gas out of the ground. Flaring, venting, and leaks are especially problematic—natural gas is colorless and odorless and nearly impossible to detect, even more so if you know that regulations don’t exist to hold you accountable.
New monitoring equipment, including planes, drones, vans, satellites, and even stationary devices, can all help to fix leaks and identify the companies that are acting responsibly and those that are not. Indeed, technology has evolved enough to make it possible to easily verify the source of emissions, and such technologies will, no doubt, be at the forefront of the strategies implemented by the largest U.S. natural companies. As the industry’s largest players, it is hard to imagine they aren’t upset with France’s decision and the lack of foresight some oil and gas producers have been operating with.
Once a company has the data to show that it is a responsible gas producer, and natural gas companies can pass that information along to potential buyers, U.S. LNG might again find itself in a good business.
Jordy Lee is a Senior Research Associate at the Payne Institute for Public Policy at the Colorado School of Mines.