A group of institutional investors worth a combined $1.5 trillion has thrown its support behind an Obama administration plan for the oil and natural gas industry to cut methane emissions from new and modified sources 40-45% below 2012 levels by 2025.
"...[W]e are concerned that methane emissions pose a serious threat to climate stability, accelerating the rate of warming in the near term and threatening infrastructure and economic harm that will weaken not only the companies we invest in, but the nation as a whole," the 30 investors said in a statement Wednesday. "As a result, we strongly support the President's proposal, which will not only help reduce methane emissions in a meaningful way, but will also improve investor confidence by further clarifying the regulatory structure and expectations for the oil and gas industry.
"In addition, the prevention of wasted methane will keep more American natural gas working for the U.S. economy. We believe that methane regulation is in the interests of long-term investors because it reduces reputational and legal risks, and in many cases generates positive economic returns."
Those signing the letter included the California Public Employees Retirement System, California State Teachers' Retirement System, the comptrollers of New York State and New York City, Trillium Asset Management, and state treasurers from Massachusetts, Maryland, Rhode Island and Oregon.
The Obama plan, which was issued in January, involves a number of federal entities, and while it appeared to be a crackdown on the industry, it also could be read as an endorsement of the continuing use of fossil fuels, particularly natural gas, with controlled emissions (see Daily GPI, Jan. 14). It is also an administration acknowledgement that the renewables industry alone cannot power the nation. The main regulatory proposals are expected to come from the U.S. Environmental Protection Agency (EPA), with final regulations due in 2016.
While the administration acknowledged that methane emissions from the oil and gas sector were down 16% since 1990, citing "significant reductions from certain parts of the sector, notably well completions," it added that, left unchecked, emissions from the sector are projected to increase more than 25% by 2025.
An EPA report issued in April concluded that methane emissions from natural gas production have fallen about 38% since 2005, but emissions from processing increased by about 38% since that year, and rose about 11% from gas transmission and storage sources (see Daily GPI, April 16). EPA said methane emissions from hydraulically fractured gas wells declined about 79% since 2005.
The administration first released a strategy to reduce methane emissions last year, giving oversight to the EPA and Department of Energy (see Daily GPI, March 28, 2014). The original plan called for the EPA to assess emissions from the oil and gas sector, while the Bureau of Land Management would update venting and flaring standards on public lands. In April 2014, the EPA released five technical papers on methane and volatile organic compound emissions from the oil and gas industry (see Daily GPI, April 15, 2014).
Investors signing the statement are part of Ceres’ Investor Network on Climate Risk, a group of 100 institutional investors with assets totaling more than $13 trillion.