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Investors Urge Tougher Methane Oversight

Image courtesy of Ilse Driessen

Methane might not get as much attention as carbon dioxide (CO2) in discussions about global warming, but it poses an equally significant threat. Methane has more than 80 times the warming power of CO2 during the first two decades after it reaches the atmosphere, according to the Environmental Defense Fund. At least one-quarter of global warming is driven by methane from human actions, with the oil and gas industry being a major contributor.

The investment community wants to do something about that. In May, institutional investors with a combined $5.35 trillion in assets under management released a statement urging the new administration to get tougher on methane emissions in its efforts to address climate change. The statement, signed by 147 oil and gas industry investors, calls for comprehensive regulations to curb greenhouse gas emissions, as well as more stringent enforcement mechanisms to back them up.

“As prudent fiduciaries, we believe virtually eliminating methane emissions as part of a low carbon transition can support the financial goals of both companies and investors,” the statement said. “By taking action on methane emissions, government can achieve valuable greenhouse gas reductions while helping American industry become cleaner and more competitive.”

Image courtesy of Bill Oxford

The new administration has signaled its desire to take a more aggressive approach to global warming and climate change. In a first-day executive order, the administration asked the Environmental Protection Agency to develop new performance standards and emissions guidelines for methane and volatile organic compounds emitted by the oil and gas industry with  a September 2021 deadline.

Methane, the main component in natural gas, doesn’t only contribute to global warming. As Environment + Energy Leader  recently noted, methane emissions are also harmful to human health and can increase the risk of respiratory illness as well as heart disease.

“The debate is not whether there should be methane regulations–it’s about how strong the methane regulations should be and how strongly they should be enforced,” said Brian Rice, portfolio manager at the California State Teachers’ Retirement System, one of the signatories. “Investors and companies have a responsibility to help ensure that methane is properly regulated.” 

The statement’s signatories were coordinated by Ceres, a nonprofit that works with market leaders on sustainability solutions and the Interfaith Center on Corporate Responsibility, a coalition of shareholder advocates.

On its website, Ceres noted that in 2019, U.S. oil and gas operations emitted 16 million metric tons of methane emissions, which represented a near-term climate impact greater than all U.S. coal-fired power plants.

Environmentalists are particularly concerned about the impact industrial accidents can have on methane emissions. Last year, a team of Dutch scientists published research on how large amounts of methane can be quickly released following accidents in the oil and gas sector. In February 2018, a single blowout at a natural gas well in Ohio released enough methane to rival a significant percentage of the man-made emissions of several European countries over an entire year.

While many in the oil and gas industry might be wary of stricter government oversight, the statement’s signatories argue that regulations would actually help, not harm, oil and gas companies. According to Ceres’ press release, “a 75 percent reduction in global methane emissions is possible with current technology and up to 40 percent of emissions could be mitigated at no net cost.”

“There is a strong business case for setting high standards on methane emissions in the oil and gas sector,” said Luan Jenifer, president of Miller/Howard Investments, another signatory. “Ultimately, ambitious standards will benefit all stakeholders–investors, businesses, communities, and the environment.”

Many energy companies are already working to reduce their methane emissions. In December, Dallas-based oil and gas producer, Pioneer Natural Resources, adopted a plan to sharply cut emissions across its lower 48 operations by 2030, with the goal of cutting greenhouse gas emissions by 25 percent and methane emissions by 40 percent.

In 2020, Jonah Energy, a Denver-based natural gas producer, became the first company to be awarded the Independent Energy Standards Corporation’s (IES) low-methane standard as part of the company’s TrustWell Responsible Gas program.

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