A natural gas industry-backed assessment by ICF International found that the cost to reduce methane emissions from gas systems is $3.35/Mcf, almost five times higher than researchers had estimated two years ago.

The analysis, issued Thursday, was commissioned by ONE Future, a coalition of gas companies formed in 2014 that is focused on reducing methane emissions. The group is led by executives of AGL Resources Inc., Apache Corp., BHP Billiton, Columbia Pipeline Group, Hess Corp., Kinder Morgan Inc., National Pipeline Grid plc and Southwestern Energy Co.

"This new study provides cost estimates of methane abatement technologies that are more consistent with current market realities," ONE Future interim Executive Director Richard Hyde said. "These findings will assist ONE Future member companies in our shared efforts to reduce methane emissions to less than 1% of total natural gas production."

A plethora of research has been ongoing for several years regarding methane emissions by regulators, academia and independent groups. The latest ICF findings are based on a marginal abatement cost -- aka the MAC curve model -- that the Fairfax, VA-based firm developed for an Environmental Defense Fund (EDF) study published in 2014 (see Daily GPIMarch 3, 2014).

Two years ago ICF said adopting existing emissions-control technologies at the time could reduce methane emissions by 40% below projected 2018 levels at a cost of 66 cents/Mcf of methane produced, or less than 1 cent/Mcf of natural gas sold. The EDF study used a baseline year of 2018 and based future gas production growth on estimates by the International Energy Agency, which indicated a larger potential reduction of methane emissions.

In the new analysis, researchers estimated reductions for each segment of the natural gas industry using data compiled by the U.S. Environmental Protection Agency's (EPA) 2012 greenhouse gas emissions inventory, as well as updated cost and emission reduction data based on the "direct experience" of ONE Future member companies.

The updated MAC analysis identified reductions across the sector could total 88.3 Bcf/year of methane at a total annualized cost of $296 million, or $3.35/Mcf of methane reduced for all segments. Excluded from the study were costs to implement reductions in the distribution segment, because costs to replace cast iron gas mains was so high that they would have skewed the overall results. The reductions for the distribution segment were calculated separately and total 8.9 Bcf, ICF said.

An additional 12.3 Bcf of reductions were projected if operators applied reduced emission completions technology for gas wells that are hydraulically fractured. Emission completions technology at drilling sites was not required in 2012 "but is now legally required, and was therefore included as a reduction from the baseline but not as part of the MAC analysis," ICF said.

Overall, total industry-wide methane reduction was estimated at 109.5 Bcf from the 2012 baseline emissions. The goal of the new MAC analysis was threefold:

  • Identify emission sources that provide the best opportunity for methane emission reduction from the gas system;
  • Develop a comprehensive listing of known emission abatement technologies for each of the identified emission sources; and
  • Calculate the cost of deploying each emission abatement technology with a MAC curve for these emission reductions.

The findings are to be used by ONE Future to develop segment-specific methane emission reduction goals that, when combined, would achieve a collective 1% or less emission target in the most cost-effective manner. The report also is to assist operators in customizing abatement strategies to fit particular emission profiles.

"Importantly, this analysis updates the list of known emission abatement technologies and provides revised costs estimates for each one," ONE Future said. "It also provides estimates of the total methane emission abatement potential associated with the various segments of the natural gas industry. At its core, the study incorporates new information on the cost of methane control technologies and practices and the ability of industry to monetize recovered gas."

The increased cost of methane reduction is higher mostly because of higher assumed costs for leak detection and repair, along with revised assumptions regarding the ability of midstream segments to monetize the value of recovered gas, ONE Future said.

"This in-depth analysis, which incorporated field data and extensive consultation with natural gas producers, midstream operators and distribution companies, confirms ONE Future's position that combining a performance target with a flexible pathway toward meeting the shared goal of further reducing emissions, gives companies the right tools to meet methane emissions reduction targets," Hyde said.

The Obama administration initially outlined its methane initiative in 2014, with a goal by 2025 of slashing methane emissions from the oil and gas sector by 40-45% from 2012 levels (see Daily GPI, March 28, 2014). Last month EPA issued final New Source Performance Standards to reduce methane, volatile organic compounds and toxic air pollutants (see Shale Daily, May 12). ONE Future members and others are working with EDF on various methane reduction technologies (see Daily GPI, April 3, 2014).

"It's ironic," said EDF's Mark Brownstein, vice president of climate and energy, in response to the latest ICF findings. "After two years of arguing voluntary initiatives will get the job done, the oil and gas industry proudly crafts a report that shows why it's not in industry's economic self interest to reduce methane emissions." The report is "exhibit A for why regulations are necessary to require the oil and gas industry to significantly reduce the nearly 10 million metric tons of methane they waste every year."