NRRI 15-04 Methane Emissions

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Methane emissions as a greenhouse gas
Methane (whose chemical formula is CH4) is the second most prevalent greenhouse gas (GHG) emitted in the United States from human activities. In 2013, it accounted for 10 percent of all U.S. GHG emissions. Methane, the primary component of natural gas, is a potent GHG, and natural gas and petroleum systems together are the largest single source of human-made methane emissions in the country, according to the U.S. Environmental Protection Agency (EPA). Methane emissions from agriculture are a close second. As expressed in the latest EPA Inventory of U.S. Greenhouse Gas Emissions and Sinks, methane emissions from the natural gas sector originate from varied sources:
[Methane]…emissions from natural gas systems include those resulting from normal operations, routine maintenance, and system upsets. Emissions from normal operations include: natural gas engine and turbine uncombusted exhaust, bleed and discharge emissions from pneumatic controllers, and fugitive emissions from system components. Routine maintenance emissions originate from pipelines, equipment, and wells during repair and maintenance activities. Pressure surge relief systems and accidents can lead to system upset emissions.1 The venting or leaking of natural gas into the atmosphere has both public health and long-term environmental effects. While varying across pipelines, the composition of natural gas in the U.S. is typically more than 95 percent methane, with ethane, propane, nitrogen, and carbon dioxide comprising the remainder.2 Methane emissions are a precursor to ground level ozone that produces smog. When co-emitted with volatile organic compounds (VOC), methane can also become toxic and pose a public-health problem. But the major concern with methane emissions presently is its effect on global warming. Methane emissions have a global warming potential (GWP) of 25 on 100-year time horizon; that is, methane emissions are about 25 times more effective than carbon dioxide at trapping heat in the atmosphere. An offsetting feature of methane emissions is its short atmospheric lifetime of 10-12 years. Methane emissions from the natural gas system have declined over the past several years. The EPA Inventory of U.S. Greenhouse Gas Emissions and Sinks indicates that methane emissions from natural gas systems have dropped by over 12 percent since 1990. For gas
1 U.S. Environmental Protection Agency 2015, 3-68.
2, page vii.
distribution the decline was over 16 percent. These declines have occurred even as 18 million more customers receive natural gas service and as production and consumption have risen to all-time record levels. Based on the EPA numbers for 2012, the leakage rate for the entire gas supply chain (which includes field production, processing, transmissions and storage, and distribution) was only around 1.3 percent, measured as the ratio of methane emissions to total field production.
Federal government actions Although methane emissions from the production and delivery of natural gas constitute a tiny portion (2 percent) of the total greenhouse gases in the U.S., they have drawn much attention recently by the Obama Administration, environmentalists, and others. The American Gas Association estimates that methane emissions from gas distribution constitutes only about 0.24 percent of throughput. The Obama Administration believes that further nudging and mandates on the gas industry would help reach GHG targets that it has set out. Efforts by various industry, non-profit and governmental groups have focused on deriving more accurate measurements of methane emissions and identifying best-practice mitigation approaches that deploy the latest proven technologies and are cost-effective. Up to now, measurement challenges have plagued efforts by policymakers to more aggressively control methane emissions. Different studies and measurement approaches, which commonly combine equipment emission factors with activity data, have turned up widely varying emissions estimates, aggravating the policy debate over the appropriate strategy to control methane emissions.
In June 2013, President Obama issued the Climate Action Plan, which is a broad-based plan to cut GHG emissions that cause climate change and affect public health. Among other things, the Climate Action Plan emphasizes that:
Curbing emissions of methane is critical to our overall effort to address global climate change. Methane currently accounts for roughly 9 percent of domestic greenhouse gas emissions and has a global warming potential that is more than 20 times greater than carbon dioxide.3
In March 2014, the Obama Administration released a report on the Strategy to Reduce Methane Emissions. The report calls for a comprehensive interagency strategy to cut methane emissions that includes natural gas distribution. It also recognized the need for improved measurements of methane emissions in addition to a combination of voluntary and regulatory policies to effectively reduce methane emissions. While the report acknowledges ongoing voluntary activities by the industry to reduce methane emissions, it advocates further efforts for achieving the Administration’s GHG emissions targets. The Administration projects that methane emissions will increase without additional action. It has moved aggressively on various fronts over the past several months to carry out the tasks supported in the report.
3 The White House 2013, 10.
In January 2015, the Administration announced that it will impose rules on controlling methane emissions. Although some groups applaud this action, others consider it unnecessary, costly, and redundant. Some observers have argued that the natural gas industry has already taken substantial actions to control methane emissions, evident by the reduction in methane emissions over the past several years: while natural gas production rose by 39 percent during 1990-2013, methane emissions dropped by 12 percent over the same period. As another factor unique to methane emissions as an air pollutant, their reduction can yield non-environmental benefits to companies, namely, higher profits and improved safety of their service. Thus, one can argue that the industry itself has ample incentive to satisfy methane-emissions targets established by the Administration.
In April of this year, the Obama Administration issued its Quadrennial Energy Review, which in part recommends further federal government actions to reduce methane emissions from the natural gas sector. A major one is R&D initiatives to reduce the cost of mitigating and detecting methane emissions from the mid-stream and distribution functions. Policy issues This paper attempts to provide a balanced narrative on the public-policy concerns with regard to methane emissions from the natural gas system. It hopes to provide a perspective on the seriousness of methane emissions, the argument for and against additional governmental action and the questions that policymakers, particularly state utility regulators, might consider asking. A major issue is whether, notwithstanding the progress made by the natural gas sector over the past several years in curbing methane emissions, federal and state governments should impose new regulations and mandates. Further initiatives aimed toward reducing methane emissions from the gas distribution system are questionable considering that this component of the economy contributes to only about 0.5 percent of the total U.S. GHG emissions.
On the other hand, in meeting its GHG emissions targets, the Obama Administration, as well as environmentalists, believes that the natural gas sector needs to take additional steps to reduce methane emissions. Such a requirement is particularly challenging for an industry that expects to see large-scale switching from other forms of energy (e.g., coal and oil) to natural gas in the years ahead, largely because of the abundance of shale gas, the economics and new environmental regulations. Stricter regulation of methane emissions may even have the counterproductive outcome of increasing total GHG emissions, as natural gas becomes less competitive and switching from dirtier sources of energy diminishes.
Several questions on methane emissions Methane Emissions as a Greenhouse Gas 1. What are amounts of methane emissions relative to total GHG emissions in the U.S.?
2. What has been the trend of methane emissions over time?
3. What are the major sources of methane emissions?
4. How do methane emissions compare with carbon dioxide in their effect on global warming?
5. How do the economics of methane emissions for the polluter differ from other air pollutants?
6. What are the major challenges in measuring methane emissions? Federal Government Actions
1. What are the different policies to control methane emissions?
2. Are standards needed to further reduce methane emissions?
3. Should policymakers exercise caution before imposing new regulations on methane emissions until they get more precise estimates of their levels?
4. How much should we do today to mitigate future global-warming damage from methane emissions?
5. How can the EPA improve the effectiveness of its Natural Gas STAR Program to reduce methane emissions from gas distribution?
6. Are the Obama Administration and other entities misdirecting their efforts toward reducing methane emissions when carbon dioxide seems like a more serious problem?
7. How can policymakers assess the current costs and potential future benefits of different methane-emissions control policies?
8. Can policymakers identify the most cost-effective approaches for mitigating methane emissions?
9. What criteria (other than cost) should policymakers apply in prioritizing methane-emissions mitigation activities?
10. What are the risks and perverse results that could derive from an ill-conceived policy on methane emissions?
11. Would federal regulations for methane be expensive and redundant?
12. Should the government continue to rely solely on voluntary industry actions, and future technological and other advancements to mitigate future methane emissions? After all, companies have taken major actions over the past several years, so why not expect this trend to continue in the future in the absence of new federal regulations? Gas Utility and State Utility Regulator Purview 1. What is the level of methane emissions from gas distribution?
2. How do these emissions from gas distribution compare with methane emissions from other components of the natural gas sector?
3. What are major sources of methane emissions from gas distribution?
4. Are gas utilities availing themselves of all cost-effective or profitable opportunities to mitigate methane emissions?
5. What are the costs of reducing methane emissions?
6. What incentives do gas utilities have to reduce methane emissions?
7. What stance should state utility regulators take in considering the reduction of methane emissions by gas utilities? Should they become more proactive?
8. What positions have gas utilities taken on how, and how much, to control methane emissions?
9. What priority or attention should gas utilities and state utility regulators place on methane emissions?
10. What should be the objective of a methane-emissions reduction strategy?
11. What metric or benchmark should regulators use to assess a utility’s performance in controlling methane emissions?

This paper tries to answer some of these questions. Others lie outside the scope of this paper but are still important for policymakers to address. The primary intent here is to educate state utility regulators on the myriad policy questions that surround methane emissions, especially those originating from the natural gas system. (This paper refers to the natural gas system as field production, processing, transmission and storage, and distribution, excluding end-use consumption.) State utility regulators have limited authority over methane emissions, but they can affect the incentives that gas utilities face, or mandate certain actions, in the pursuit of further emissions reductions. So far, gas utilities have exhibited robust behavior in replacing cast-iron and bare steel pipes, which has as a secondary effect on the reduction of methane emissions. Safety drives the motive for pipeline replacement, which also allows utilities to grow their rate base and profits. Gas utilities have shown less enthusiasm toward other actions to reduce methane emissions, presumably because they offer little profit opportunities and have negligible safety risks. The ultimate question boils down to whether state utility commissions should reshape utility incentives for reducing methane emissions, other than from pipe replacement, in the future.