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'Responsibly Sourced' Gas Takes Leap With New US E&P Deal

Copyright © 2021 Energy Intelligence Group

Southwestern Energy is the first Appalachian E&P to seek certification of all its production as responsibly sourced gas (RSG) in a move it says creates "sustainable value" and sets it apart from other producers by committing to low-carbon production. But whether Project Canary certification is a meaningful carbon-reduction move or largely a public image booster in the face of increasing shareholder pressure is still an open debate. "It does raise a question," said Mark Agerton, a nonresident fellow at Rice University’s Baker Institute. "You pay for this company to monitor your wells and they sign off. The company gets a price premium and project Canary collects a fee. I think it’s important to make sure these are independent processes." Nonetheless, Project Canary certification stands to give Southwestern an unprecedented leg up as the North American market becomes increasing global and environmental pressures mount. "Every day in the [US], over 90 billion cubic feet per day of natural gas is produced, of which only a fraction is certified as responsibly produced," Southwestern spokesperson Brittany Raiford told Energy Intelligence. "Domestically and across the world, end-users are increasingly asking for more information about the energy they consume and how it was produced, which is strongly growing demand for certified responsibly produced gas." An Evolving Process While RSG certification by a third-party private agency is a relatively new concept, acceptance will likely solidify outside the sector due to its quantifiable environmental benefits, said Brian Miller, vice president of growth and policy for Project Canary. Project Canary became the leader in the US certification space after its August 2020 merger with Dallas-based Independent Energy Standards (IES). In that deal, Project Canary -- already a leading provider of continuous emissions monitoring -- added the IES Trustwell certification program to its toolbox. This allows Project Canary to confer RSG certification via a two-pronged process. The Trustwell system certifies the responsibility of operations on a well-by-well basis. Each well is thoroughly checked using "sound engineering principals and standards," Miller said. The 600 data points gauge each well’s physical integrity, including well bore casing and drilling practices; ensures the operator has measures in place to respond to spills and dispose of wastewater and that ongoing operations are not adversely affecting the air, land, water or community. Added to this process is continuous monitoring for emissions, which non-sector sources tell Energy Intelligence is the most important part of any certification scheme. "Data quality only goes so far with an estimation or model. Onsite continuous measurement is necessary," said Ratnika Prasad with the Environmental Defense Fund (EDF). "If any company is to credibly say their gas is low-methane then it needs to be shown it is low-methane by actual measurements." Project Canary evaluates a client’s operations to determine if it warrants silver, gold or platinum certification. Firms seeking RSG certification, such as Southwestern, will generally go for the gold, which combines meeting major Trustwell standards with continuous onsite emissions monitoring. Project Canary now contracts services with around 40 clients from E&Ps and midstream operators to utilities and expects to have up to 10,000 wells under certification and 1,000 methane monitors deployed in the field by year’s end, Miller said. He added there are roughly three times as many companies "in our sales pipeline" largely driven by environmental, social and governance (ESG) concerns of buyers and investors, who ultimately want transparency through data. Appalachian/Haynesville E&Ps On Board The largest US gas producer -- Appalachian pure-play EQT -- has begun a pilot program with Project Canary at two of its well pads, accompanied by continuous methane emissions monitoring of the pads (NGW Feb.1'21). Meanwhile, Chesapeake Energy recently announced it is starting a similar pilot program in the Haynesville, with an eye on LNG demand (NGW Apr.19'21). Southwestern jumped ahead of its rivals with the goal of having all its 3 Bcf/d of production certified as responsibly sourced. "Southwestern’s established ESG practices and performance, including the recently announced RSG certification agreement, further positions the company to create value for all of our stakeholders through for a lower carbon future," Raiford told Energy Intelligence. And once the acquisition of Haynesville producer Indigo Natural Resources is completed late this year, she added, "we will give more details on how we are integrating [Indigo’s] ESG processes and expanding our established ESG programs into the Haynesville" (NGW Jun.7'21). What's the Endgame? It’s clear that what Project Canary offers is not just putting lipstick on a pig and has environmental benefits, sources say. But where it leads is another matter. "It’s important to have the standards be transparent and kind of harmonizable so you can have a functional market that allows people to trade RSG from different places," said Agerton, an associate professor for Agricultural and Resource Economics at the University of California, Davis. While independent certification is necessary, standardization is also important to prevent the market from being "balkanized," he observed. "With 50 different certification schemes, you'd have to do a bilateral deal for whatever flavor of the month RSG you want. … I think there is a golden opportunity for a regulator to help develop a common certification standard that would facilitate and coordinate a similar standard. And that would actually speed up a market for RSG." Prasad, EDF's director for Energy Strategy, told Energy Intelligence that the environmental watchdog considered the "jury out" on various methods of RSG certification. "A claim is only as good as the rigor behind it," she explained. "How frequently is it audited? There is a long list of things that make this more or less rigorous. Until and we know the data is of the highest quality and its processes are of the highest rigour, it’s still early to claim something is credibly low methane or low carbon." As voluntary certification programs arise, she added, "We would just wave the same challenge to them we wave to regulators. Let’s put in place the best measures for the highest integrity per actual measurements that are objective, not based on some computer models and take it from there." "It’s way too soon to make a proclamation about whether this will be a game changer -- perhaps it might and perhaps not," she concluded. "What I can say it's actually becoming a competitive concern that producers ought to pay attention to. I can’t say this the tipping point, but the competitive trend is headed that way." Tom Haywood, Houston

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