Image source: Home Energy Efficiency Team (HEET)

Our reliance on natural gas is growing as coal plants shutter and the costs of producing natural gas fall. The International Energy Agency’s (IEA) 2017 World Energy Outlook noted that under its Sustainable Development Scenario—a scenario that aims to limit global temperature rise to under 2 degrees Celsius pursuant to the Paris Agreement—natural gas is expected to become the single largest fuel source in the global energy mix by 2030. But IEA also notes that to assure the climate benefits of this rapidly expanding fuel, methane leaks across the value chain must be controlled. ³ ✕ ³OECD/IEA. World Energy Outlook 2017 (2017), 30, www.iea.org/weo2017/  Companies relying on the perception that natural gas is a “clean” fuel with less climate impact than coal may face significant reputational risks if methane emissions are not responsibly managed.

While it is challenging to quantify precisely how much methane is currently released from natural gas distribution systems, the potential scope of the problem is troubling. Estimates of the extent of natural gas emissions and leaks vary widely. In recent years there has been a large number of studies and assessments performed to assess the amount of leakage from various parts of the natural gas value chain. Differing methodologies – from calculated emission factors to direct and indirect measurements -- have produced a broad range of emission estimates, ^4, ✕ ⁴Table 4 in this report compares emissions from the natural gas system determined from the study to 2011 EPA GHG Inventory values. While it aims to show overestimation on the part of the EPA, the activity factors researchers used had up to 30% uncertainty. Brian K. Lamb et al., “Direct Measurements Show Decreasing Methane Emissions from Natural Gas Local Distribution Systems in the United States,” Environmental Science & Technology (2015), 49 (8), 5161-5169, https://pubs.acs.org/doi/abs/10.1021/es505116p. ^5, ✕ ⁵Figure 1 in this report shows an estimate of 66 BcF loss of natural gas from the distribution sector. This corresponds to 740,000 Gg CH4, or a 200% difference from the study in previous footnote. Conversions and assumptions: 1. Natural gas can be estimated as ~94.9% CH4 by volume (A. Demirbas, Methane Gas Hydrate, Springer 2010) 2. Density of CH4 = 0.42 g/cm3 (aqua-calc.com) 3. 66 BcF natural gas = 62,00,000 McF CH4 = 740,000 kt CH4 James Bradbury, Zachary Clement, and Adrian Down. “Greenhouse Gas Emissions and Fuel Use Within the Natural Gas Supply Chain – Sankey Diagram Methodology,” U.S. Department of Energy, Office of Energy Policy and Systems Analysis, (2015), https://energy.gov/epsa/downloads/fuel-use-and-greenhouse-gas-emissions-natural-gas-system-sankey-diagram-methodology.  creating uncertainty. A recent study of the National Academy of Science acknowledges the importance of understanding and managing methane emissions. ⁶ ✕ ⁶National Academy of Sciences, Engineering, and Medicine. “Improving Characterization of Anthropogenic Methane Emissions in the United States,” Washington, DC: The National Academies Press. https://doi.org/10.17226/24987.  The report describes the uncertainties in existing methane data and the complex approaches involved in measuring the scope of the problem and calls for comprehensive improvements to federal methane research and reporting systems.

A 2018 inventory of U.S. greenhouse gas emissions published by the Environmental Protection Agency (EPA), which is updated annually, estimates that the distribution segment accounts for 7% of the 163.5 MMT CO2 Eq. (6,541 kt) of methane released by the U.S. natural gas supply chain 2016. ⁷ ✕ ⁷U.S. Environmental Protection Agency, “Inventory of U.S. Greenhouse Gas Emissions and Sinks: 1990-2016,” (2018), https://www.epa.gov/sites/production/files/2018-01/documents/2018_complete_report.pdf.  Some studies conclude that the EPA inventory data tends to understate total emissions from particular sources (the IEA’s 2017 World Energy Outlook found that the downstream sector accounts for closer to 35% of total natural gas emissions), ⁸ ✕ ⁸OECD/IEA. World Energy Outlook 2017 (2017), 427, http://www.iea.org/publications/freepublications/publication/WEO2017Excerpt_Outlook_for_Natural_Gas.pdf.  while other studies find the inventory overstates emissions. Multiple factors contribute to this uncertainty including the difference between top-down and bottom-up measurement approaches, the completeness of sources inventoried, skewed distribution of leak size across distribution pipelines area (many small leaks and a few “super emitter” leaks) that limits the validity of relying on averages to infer broader conclusions, etc. ^9, ✕ ⁹Boston University finds 7% of leaks contribute 50% of total measured CH4 emissions. Margaret F. Hendrick et al. “Fugitive Methane Emissions from Leak-Prone Natural Gas Distribution Infrastructure in Urban Environments,” Environmental Pollution (Volume 213, ISSN 0269-7491, 2016), 710-716, https://doi.org/10.1016/j.envpol.2016.01.094. ^10, ✕ ¹⁰David T Allen, “Methane Emissions From Natural Gas Production and Use: Reconciling Bottom-Up and Top-Down Measurements,” Current Opinion in Chemical Engineering, (Volume 5, 2014) 78-83, https://doi.org/10.1016/j.coche.2014.05.004. ^11, ✕ ¹¹This study found three large leaks accounted for 50% of total measured emissions from pipeline leaks. Washington State University, Lamb BK, et al. “Direct Measurements Show Decreasing Methane Emissions from Natural Gas Distribution Systems in the United States,” NCBI, (2015). https://www.ncbi.nlm.nih.gov/pubmed/25826444. ^12, ✕ ¹²This report questions use of the mean value of leak rates in determining methane emissions as not accounting for data skew. Khalid Farrag and Kristine Wiley. “Improving Methane Emission Estimates for Natural Gas Distribution Companies: Phase II PE Pipes,” Gas Technology Institute (GTI) for the Operation Technology Development (OTD), (GTI Report No. 21044, OTD Project Number 7.10.c, 2013), https://www.otd-co.org/reports/Documents/710c_OTD-14-0001-Improving-Methane-Emission-Estimates-NG-Distribution-Companies-PE-Pipes-FinalReport.pdf. ¹³ ✕ ¹³For detailed technical discussion of these issues, see G. Heath et al. “Estimating U.S. Methane Emissions from the Natural Gas Supply Chain: Approaches, Uncertainties, Current Estimates, and Future Studies,” Joint Institute for Strategic Energy Analysis (Technical Report NREL/TP-6A50-62820, August 2015), http://www.nrel.gov/docs/fy16osti/62820.pdf.  A further example of such discrepancies is the EPA’s 2014 estimate that the value of gas lost due nationwide to distribution pipeline leaks was $192 million in one year, ¹⁴ ✕ ¹⁴Rick Beusse et al., ”Improvements Needed in EPA Efforts to Address Methane Emissions from Natural Gas Distribution Pipelines” US Environmental Protection Agency (Report no. 14-P-0324, July 2014), https://www.epa.gov/sites/production/files/2015-09/documents/20140725-14-p-0324_0.pdf.  while a separate report found that distribution methane emissions in the city of Boston alone valued as much as $90 million annually. ¹⁵ ✕ ¹⁵Kathryn McKain et al. “Methane Emissions from Natural Gas Infrastructure and Use in the Urban Region of Boston, Massachusetts,” (Proceedings of the National Academy of Sciences: December 2014). https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4343086/pdf/pnas.201416261.pdf.

The fact that new monitoring equipment and methods are being developed suggests that such questions will begin to be answered with more certainty. For example, the Environmental Defense Fund (EDF) recently released a robust report finding that 2.3% of natural gas produced in the U.S. is being emitted to the atmosphere—a figure that is 60% higher than the EPA’s estimate. ¹⁶ ✕ ¹⁶Ramón A. Alvarez et al. ”Assessment of Methane Emissions From the U.S. Oil and Gas Supply Chain,” Science (June 2018), http://science.sciencemag.org/content/early/2018/06/20/science.aar7204.

There is widespread consensus that aging cast iron and unprotected steel pipelines within older natural gas distribution systems are subject to significant leakage. Cast iron is 24 times more likely to leak than plastic and 78 times more likely to leak than protected steel. Unprotected bare steel is 11 times more likely to leak than plastic and 36 times more likely to leak than protected steel. ¹⁷ ✕ ¹⁷Federal Register. Rules and Regulations. Vol. 76, No. 247. December 23, 2011. http://www.gpo.gov/fdsys/pkg/FR-2011-12-23/pdf/2011-31532.pdf(Page 80595).  Most local distribution companies are proactively replacing these leak-prone pipelines, but large inventories remain – over 60 thousand miles of mains nationwide. ¹⁸ ✕ ¹⁸Pipeline and Hazardous Materials Safety Administration, “Gas Distribution Annual Data - 2010 to present (ZIP),” (2016), https://www.phmsa.dot.gov/sites/phmsa.dot.gov/files/data_statistics/pipeline/annual_gas_distribution_2010_present.zip(Downloadable documents).   The rate at which replacement is occurring differs significantly from company to company, or even subsidiary to subsidiary, with some companies having replacement timelines of 10 years and others up to 40 years. ¹⁹ ✕ ¹⁹Michael Reed. “Replacing Aging Pipe Remains a Big Source for Work” Pipeline & Gas Journal, Vol. 244, No. 4, (April 2017), https://pgjonline.com/magazine/2017/april-2017-vol-244-no-4/features/replacing-aging-pipe-remains-a-big-source-for-work.   Most of the oldest and most leak-prone pipeline inventory is located in northeastern states. Pennsylvania and New York have the highest combined unprotected steel and cast-iron inventories, with over nine thousand miles of leak-prone mains found in each state.

Safety concerns have historically been the main focus of methane emissions management for cities and other end-use distributors of natural gas. Methane leaks in contained spaces can reach concentrations high enough to cause catastrophic, deadly explosions. In the last 20 years, the U.S. natural gas distribution sector was responsible for 248 fatalities and 1,003 injuries, as well as $1.1 billion in associated expenses (including property damages to operators and others, but excluding the cost of gas lost), where many of these incidents were caused by corrosion (a common problem for aging cast iron and bare steel pipes), equipment failure, excavation damage by other entities working in the streets, or a variety of other events. ²⁰ ✕ ²⁰Pipeline and Hazardous Materials Safety Administration, “Pipeline Incident 20 Year Trend: All Reported Incidents: Gas Distribution,” (last modified 4/23/18), https://www.phmsa.dot.gov/data-and-statistics/pipeline/pipeline-incident-20-year-trends.   One particularly tragic incident occurred in Harlem in 2014 when a natural gas explosion killed eight people, injured over 50 people, displaced more than 100 families and businesses, and destroyed two buildings. ²¹ ✕ ²¹“Con Edison Reaches $153 Million Settlement Over Fatal 2014 Harlem Blast,” Reuters, February 2017, https://www.reuters.com/article/us-new-york-conedison/con-edison-reaches-153-million-settlement-over-fatal-2014-harlem-blast-idUSKBN15V2Q8.  While this incident was caused by unusual factors, including a nearby leaking sewer connection, ²² ✕ ²²“National Transportation Safety Board. “Accident Report: Natural Gas-Fueled Building Explosion and Resulting Fire,” (June 2015), https://www.ntsb.gov/investigations/AccidentReports/Reports/PAR1501.pdf.  it drew significant attention to the explosive risks of methane leaks.

As awareness of methane’s significant climate impacts has increased, the focus on methane emissions is now broadening beyond safety to include less concentrated leaks in less populated areas. Companies are increasingly being asked by investors, local authorities, and civil society to demonstrate how they will transition their operational practices to align with the global Paris Agreement’s vital goal of maintaining global temperature rise well below 2 degrees Celsius. ²³ ✕ ²³See for example, Sean Wright, “Methane rises on investors’ risk radar,” Peteroleum Economist, June 2018, http://www.petroleum-economist.com/articles/upstream/technology/2018/methane-rises-on-investors-risk-radar.  Since methane is a potent, short term climate forcer, methane emissions are appropriately under increasing scrutiny as an area where significant improvements are needed and can be made cost effectively through existing and developing controls. Improvements in monitoring technologies and methods are continuing to shed light on where leaks exist; and best practices to reduce lost gas are readily available as discussed below. LDCs who do not implement such management controls will lag behind their peers.

One controversial market practice is the billing of customers for lost and unaccounted for gas (LUAF). When LDCs are allowed to collect payments for lost and unaccounted for gas, LDCs may be less likely to make the reduction of lost gas a high priority. Broadly, LUAF is the difference between the total volume of natural gas purchased by a distribution company and the volume of natural gas that company delivers to customers. It is caused by direct gas releases to the atmosphere through leaks or other fugitive emissions (known as “lost gas”), theft, company internal use, or measurement errors. ²⁴ ✕ ²⁴ICF International. “Lost and Unaccounted for Gas,” December 23, 2014, http://www.mass.gov/eea/docs/dpu/gas/icf-lauf-report.pdf(Page i).  Companies are required to report calculated LUAF metrics to the Pipeline and Hazardous Materials Safety Administration, but in almost every state, companies legally charge customers for the total volume of gas the company purchased, including LUAF. ²⁵ ✕ ²⁵Romany M. Webb. “Lost but not Forgotten: The Hidden Environmental Costs of Compensating Pipelines for Natural Gas Losses,” University of Texas at Austin, Texas Scholar Works, The Kay Bailey Hutchinson Center for Energy, Law and Business, April 2015, https://repositories.lib.utexas.edu/handle/2152/33371.  LDCs and the EPA argue that LUAF cannot be used as a direct proxy for lost gas given calculation complications and the inability to determine what portion of LUAF is truly gas gone lost. Many LDCs calculate the amount of gas lost from their system to be insignificantly small, while other studies find it to be alarming. One report noted that “LDCs are allowed to pass on the costs of fugitive emissions to customers, at a rate of $38.8 million annually.” ²⁶ ✕ ²⁶Shanna Cleveland. “Into Thin Air: How Leaking Natural Gas Infrastructure is Harming our Environment and Wasting a Valuable Resource,” Conservation Law Foundation, November 2012, https://www.clf.org/publication/into-thin-air/.  As reporting improves, local commissions may be able to set rates that better account for true methane leakage, but currently this remains an area of concern. Thus far, only five states have set caps limiting how much LUAF can be included in retail rates, and those caps are all above the rates that most utilities typically report, limiting the impact of those laws. ²⁷ ✕ ²⁷Romany M. Webb. “Lost but not Forgotten: The Hidden Environmental Costs of Compensating Pipelines for Natural Gas Losses,” University of Texas at Austin, Texas Scholar Works, The Kay Bailey Hutchinson Center for Energy, Law and Business, April 2015, https://repositories.lib.utexas.edu/handle/2152/33371.

In recent years, concerned organizations and policymakers have begun to focus legislative attention on the climate change implications of leaking natural gas pipelines and other sources of methane emissions from LDCs. States, in particular, are increasingly taking a lead role in fighting methane emissions. Since Colorado passed the first rules in the country to limit upstream methane emissions in 2014, ²⁸ ✕ ²⁸These aggressive rules, developed by both energy companies and environmentalists, were the first of their kind to directly regulate methane emissions, which were previously only indirectly controlled by the Clean Air Act’s air quality standards for ozone. The new air quality regulations were designed to reduce more than 60,000 tons of methane emissions per year. Included are mandatory leak repair timeframes as short as 5 days and mandatory reductions in methane emission by 95%. Stephanie Paige Oburn. “Colorado First State to Limit Methane Pollution from Oil and Gas Wells,” Scientific American, February 25, 2014, https://www.scientificamerican.com/article/colorado-first-state-to-limit-methane-pollution-from-oil-and-gas-wells/.   many states have followed suit, including expanding the scope of regulatory applications downstream. Notably, Massachusetts and California proposed and passed regulations identifying natural gas distribution leaks as a climate change concern. Regulatory focus has included leak detection and repair technology, mandatory repair time frames, and limits on cost recovery for lost and unaccounted for gas. ^29, ✕ ²⁹Oregon passed SB 844 in 2013 to address the financial burden of emission abatement. This bill establishes a method for utilities to recover costs for investments on projects that achieve reduced emissions, thus creating a pivotal incentive for voluntary efforts to curb emissions. OR State Senate, SB 844 Relating to greenhouse gas emissions; Beyer, Bailey, and Read; 2014 https://olis.leg.state.or.us/liz/2013R1/Downloads/MeasureDocument/SB844/Enrolled. ³⁰ ✕ ³⁰Some states, including Connecticut, Ohio, Pennsylvania, Texas and West Virginia have set a cap on the amount of Lost and Unaccounted for Gas that LDCs are allowed to recover through consumer rates, where anything above a certain percentage is considered unreasonable. Romany M. Webb. “Lost but not Forgotten: The Hidden Environmental Costs of Compensating Pipelines for Natural Gas Losses,” University of Texas at Austin, Texas Scholar Works, The Kay Bailey Hutchinson Center for Energy, Law and Business, April 2015, https://repositories.lib.utexas.edu/handle/2152/33371.   California ambitiously passed Senate Bill 1371 in 2014, an extensive, first-of-its-kind bill dedicated exclusively to natural gas leak abatement in the name of climate impact. ³¹ ✕ ³¹CA State Senate, “SB-1371 Natural Gas: Leakage Abatement,” Leno, 2014, https://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=201320140SB1371.   This law requires the California Public Utilities Commission to develop a series of regulations, including 26 mandatory best practices, to minimize and mitigate gas leaks. ³² ✕ ³²CA CPUC, “Rulemaking 15-01-008 Decision Approving Natural Gas Leak Abatement Program Consistent with Senate Bill 1371,” June 15, 2017, http://docs.cpuc.ca.gov/PublishedDocs/Published/G000/M190/K740/190740714.PDF.  Given the lead of California and Massachusetts, state-level pressure is likely to increase, and since many companies operate in more than one region, it is in their best interest to adapt and prepare for such regulatory pressure.

The IEA’s 2017 World Energy Outlook found that 40-50% of emissions from the oil and gas sector can be reduced at no net cost. ³³ ✕ ³³OECD/IEA. “World Energy Outlook 2017” (2017), 427, http://www.iea.org/publications/freepublications/publication/WEO2017Excerpt_Outlook_for_Natural_Gas.pdf.   For example, reducing blowdowns during planned work, rapidly improving detection and monitoring technologies, and using other new and developing tools are helping companies decrease emissions and retain natural gas product in their pipelines.

Best Practice Example: In its 2016 Gas Long Range Plan, Consolidated Edison describes its testing and use of the monitoring and assessment technology called Picarro, including information about the system areas to which Picarro is applied. The company notes that the benefit of Picarro is that “the equipment’s sensitivity and the use of propriety algorithms incorporating real-time atmospheric and meteorological conditions allow the system to detect methane leaks much farther from the source when compared to traditional leak survey equipment.” ³⁴ ✕ ³⁴OECD/IEA. Consolidated Edison. “Gas Long Range Plan,” March 2016, https://www.coned.com/-/media/files/coned/documents/our-energy-future/our-energy-projects/gas-long-range-plan.pdf (Page 36).   The company continues to partner with EDF, Google, and Colorado State University to experiment with advanced leak detection technology that, “identifies problem areas faster, cheaper than before, reducing waste and emissions.” ³⁵ ✕ ³⁵Con Edison Media Relations & Environment Defense Fund, (EDF), “Con Edison Partners with EDF and Google to Map and Measure Methane Leaks, Prioritize Infrastructure Upgrades on NYC and Westchester Natural Gas System.” Con Edison Press Release, February 7, 2018, https://www.coned.com/en/about-con-edison/media/news/20180207/con-edison-partners-with-edf-and-google-to-map-and-measure-methane-leaks.

Best Practice Example:  Consolidated Edison surveys all gas distribution mains on a monthly basis. Smaller gas service lines are surveyed annually (in business districts) and every three years (in non-business districts). The company also performs additional surveys in special circumstances like extreme weather or prior to a parade. ³⁶ ✕ ³⁶Consolidated Edison, Gas Long Range Plan. March 2016, p.36, https://www.coned.com/-/media/files/coned/documents/our-energy-future/our-energy-projects/gas-long-range-plan.pdf. While these practices are better than most, from a climate perspective we believe that location alone, such as being further away from a business district, should not determine frequency of monitoring to the extent that such pipes may be as likely to leak methane as those closer to business districts.

Best Practice Example:  SoCalGas, a Sempra subsidiary, successfully reduces emissions from blowdowns by either compressing gas or capturing it in pods or ‘tube trailers’ and then re-introducing it back into the pipeline once work is complete. SoCalGas has also been introducing smart meters that help identify ‘behind the meter leaks’ (leaks that occur on the owner’s property instead of on the side of utility and grid). ³⁷ ✕ ³⁷Southern California Gas Company, “2018 Leak Abatement Compliance Plan.” March 15, 2018. https://www.socalgas.com/regulatory/documents/r-15-01-008/SB_1371_SoCalGas_2018_Compliance_Plan-FINAL_March_15_%202018.pdf.   Another example of a routine operational best practice is the Gold Shovel Standard program. This practice  initiated by PG&E, addresses leak safety during excavations by setting standard processes for contractors that minimize risks of running into underground pipelines. Such processes involve alerting relevant agencies of the existence of hidden pipelines so they can be marked and avoided during digging work. ³⁸ ✕ ³⁸PG&E External Communications, “PG&E’s Gold Shovel Standard Paves the Way for Safe Excavation,” August 11, 2014, https://www.pge.com/en/about/newsroom/newsdetails/index.page?title=20140811_pges_gold_shovel_standard_paves_the_way_for_safe_excavation.

Best Practice Example:  Eversource, National Grid, and NiSource recently worked with local nonprofits Mothers Out Front and Home Energy Efficiency Team (HEET) on a pilot project in which a Shared Action Plan was created. The Plan provides a timeframe for leak repair within 1 to 2 years for Type 3 large volume leaks as determined by the leak extent method. ³⁹ ✕ ³⁹HEET, “Shared Action Plan,” (accessed 4/25/2018), https://heetma.org/gas-leaks/fix-big-gas-leaks/shared-action-plan/.   While this outcome is a positive example of collaboration and commitment to improvement, shorter timelines would be preferable. For example, Consolidated Edison averages a repair time of less than 40 days for its Type 3 leaks, an average that it is continuing to improve. ⁴⁰ ✕ ⁴⁰Consolidated Edison, “Sustainability Report.” (2016-2017), https://www.conedison.com/ehs/2016-sustainability-report/files/Full_ConEd_SR_2016-2017.pdf.

Best Practice Example: Several leading utilities including PSE&G and National Grid are integrating leak survey data into their risk assessments for replacement of leak-prone pipes. Both companies have worked with EDF and Google on pilot projects using technology to measure not only the quantity of leaks, but also the volume of gas leaking to determine the priority level of replacing specific pipes. In this way, they are able to replace the worst-emitting pipelines first. ⁴¹ ✕ ⁴¹Environmental Defense Fund, “PSE&G Teams with Google, EDF to Stop Methane Leaks,” December 2016, https://www.prnewswire.com/news-releases/pseg-teams-with-google-edf-to-stop-methane-leaks-300377189.html.   In terms of timeline, Consolidated Edison provides a description of its plan to replace all cast iron and unprotected steel pipeline mains, companywide, by 2036, ⁴² ✕ ⁴²Consolidated Edison, “Gas Long Range Plan,” March 2016: 32, https://www.coned.com/-/media/files/coned/documents/our-energy-future/our-energy-projects/gas-long-range-plan.pdf.   and Exelon provides its detailed plan to do so by 2037. ⁴³ ✕ ⁴³Exelon, “Replacement Program and Timeline Details,” http://www.exeloncorp.com/sustainability/Documents/Replacement_program.pdf.   While other companies have provided shorter timelines that apply to either just one of their subsidiaries or to just one type of pipeline material (either cast iron or bare steel), leadership on companywide replacement of all leak-prone inventory remains lacking.

Background: Methane emissions can be reported as an absolute quantity or as an intensity rate. Shareholders believe both are important measures that should be reported by companies, as they each provide distinct benefits. Absolute emissions reporting provides clear information on the environmental impact of a company’s operations. The larger the absolute emissions are, the more important it is for the entity to be vigilant and take effective and proactive actions. Absolute emissions are often reported in metric tons of CO2e or million standard cubic feet. Methane intensity reporting, i.e., emissions as a percentage of gross production or throughput (throughput is often reported by LDCs as sales or deliveries), ⁴⁴ ✕ ⁴⁴Exact calculation methods for methane intensity continue to evolve, so it is important for a company to clarify how it performs this calculation and what the company incorporates into both the numerator and denominator of the intensity ratio..   is a measure of the efficiency of a company’s system with regard to methane leaks. This rate provides an important measure of comparability between companies, which cannot be achieved by comparing absolute methane emissions, which vary based on the size of a company. Further, studies often point to a 3.2% supply chain leakage threshold beyond which natural gas is no longer a more climate-beneficial option than coal. ⁴⁵ ✕ ⁴⁵Ramón A. Alvarez et al. “Greater Focus Needed on Methane Leakage from Natural Gas Infrastructure,” (Proceedings of the National Academy of Sciences of the United States of America, 109 (17), February 2012) 6435-6440, http://doi.org/10.1073/pnas.1202407109.   This reality underscores the importance of disclosing a methane emissions intensity metric. Additionally, providing such intensity metrics for each segment of the natural gas supply chain helps investors understand which operations are contributing more to climate change and where significant methane risks are found for companies with operations in more than one stage of the supply chain.

Best Practice Example: Southern Company’s recent “Planning for a low-carbon future” report provides the company’s intensity rate of 0.25% and its absolute 2016 emissions totaling 1,900 million standard cubic feet (MMscf). ⁴⁶ ✕ ⁴⁶Southern Company. “Planning for a Low-Carbon Future,” (April 2018), 22, https://www.southerncompany.com/content/dam/southern-company/pdf/corpresponsibility/Planning-for-a-low-carbon-future.pdf..   Dominion’s updated Methane Management Report discloses absolute and intensity emissions data for each of its natural gas business segments. ⁴⁷ ✕ ⁴⁷Dominion Energy, “Methane Management Report,” (Revised May 3, 2018), 8, https://www.dominionenergy.com/library/domcom/media/community/environment/reports-performance/methane-management-report-2017.pdf.  

Best Practice Example: Dominion’s 2017 Methane Management Report notes that reported emissions are in line with the EPA’s Greenhouse Gas Reporting Program (GHGRP) protocol. The company further lists the multiple ways it measures, calculates, and estimates emissions including actual field measurements and engineering estimates. ⁴⁸ ✕ ⁴⁸Dominion Energy, “Methane Management Report 2017.” 7, https://www.dominionenergy.com/library/domcom/media/community/environment/reports-performance/methane-management-report-2017.pdf?la=en.   This informative list would benefit from more clarity on how the distinct methods are combined to provide the most accurate reporting possible.

Background: Investors believe that target setting and reporting on progress in attaining targets is critical to creating sustained momentum within companies for methane emissions reductions. Due to the unique properties of methane, such as its short term, powerful climate forcing nature, shareholders suggest that companies set standalone methane reduction targets in addition to CO2e GHG targets. ⁴⁹ ✕ ⁴⁹Environmental Defense Fund, “Taking Aim: Hitting the Mark on Oil and Gas Methane Targets,” (April 2018), https://www.edf.org/sites/default/files/documents/EDF_TakingAim.pdf.   While companies may be concerned that certain unanticipated events could affect a company’s ability to meet a target, investors are sophisticated enough to understand that there are reasons why targets may not be met in any given year, including expansion of systems due to mergers or purchases. Companies should adopt and disclose ambitious, quantitative, and time-bound targets and discuss whether they were met and, if not, why. The act of setting and taking appropriate actions toward achieving ambitious targets is viewed as a critical means of realizing progress. Some best practices to support achieving targets are to provide training on, and economic incentives for, emissions reductions to management and field staff.

Best Practice Example: As of this report, Southern Company and National Grid are the only two distribution companies that have joined the ONE Future program. The ONE Future program outlines a 1% leakage rate goal across the natural gas supply system by 2025 and specifies distribution-specific intensity goals of 0.48% by 2020 and 0.44% by 2025, where emissions intensity is defined as methane emissions divided by throughput. ⁵⁰ ✕ ⁵⁰ONE Future, “Methane Emissions Estimation Protocol.” (August 2016), http://onefuture.us/wp-content/uploads/2018/05/ONE-Future-Methane-Intensity-Protocol-v-1-2016.pdf.   Southern’s recent climate report noted that its intensity rate is already below this target. ⁵¹ ✕ ⁵¹Southern Company, “Planning for a Low-Carbon Future.” (April 2018), 22, https://www.southerncompany.com/content/dam/southern-company/pdf/corpresponsibility/Planning-for-a-low-carbon-future.pdf.   NiSource has committed to reducing absolute methane emissions from gas distribution mains and services by 50% by 2025 from a 2005 baseline and has reported that it is on track to meet this target with reductions of 28% achieved by 2016. ⁵² ✕ ⁵²NiSource Inc, “Climate Change 2017 Information Request,” (CDP, 2017), https://www.cdp.net/en/responses?utf8=%E2%9C%93&queries%5Bname%5D=nisource.   Exelon recently became the first LDC to set both an absolute methane target (100,000 mtCO2e (4,000 mt methane)) by 2022 from a 2017 baseline, and an intensity target of 0.32% by 2022 from 2017’s 0.40% baseline. ⁵³ ✕ ⁵³Exelon, “Methane Emissions from Exelon Utility (BGE, PECO, DPL) Gas Distribution Systems,” http://www.exeloncorp.com/sustainability/Documents/GHG_emission_and_intensity.pdf.  

Beyond internal policy, whenever possible, companies can constructively engage with relevant regulatory agencies and other external stakeholder groups to promote a greater industrywide adoption of best practices. Companies can do this through voluntary group initiatives like the EPA Natural Gas STAR and Methane Challenge and/or ONE Future Programs. They also participate in groups like M.J. Bradley’s Downstream Natural Gas Initiative and in studies with environmental groups and academic institutions. ⁵⁴ ✕ ⁵⁴Many leading companies have joined group initiatives, working together and with external stakeholders to improve knowledge sharing and capacity building related to methane management. The EPA Natural Gas STAR and Methane Challenge Programs bring together 152 companies, encouraging voluntary action (https://www.epa.gov/natural-gas-star-program/meet-our-program-partners). The Methane Challenge offers two options to sign on: 1) committing to one or more specific, best management practice; or 2) joining the ONE Future Coalition and setting segment-specific emissions intensity targets that align with a U.S. goal of limiting methane emissions from the onshore natural gas value chain to 1% by 2025 (https://www.epa.gov/natural-gas-star-program/methane-challenge-program). Others have participated in M.J. Bradley’s Downstream Natural Gas Initiative (https://mjbradley.com/content/downstream-natural-gas-initiative), studies with the Environmental Defense Fund and universities (https://www.edf.org/sites/default/files/methane_studies_fact_sheet.pdf), and pilot projects such as that driven by NGO partners Mothers Out Front and HEET (https://heetma.org/gas-leaks/fix-big-gas-leaks/)). While EPA programs such as the Methane Challenge aim to improve transparency and hope to finally publish company data in the near future, delays and obstacles have thus far impeded the program from making participant data publicly accessible, further emphasizing the importance of direct reporting from companies.   A recent ‘Guiding Principles’ plan outlining a set of voluntary methane reductions was created and adopted by an international group of companies; the Guiding Principles explicitly identify a need to focus on the complete supply chain. ⁵⁵ ✕ ⁵⁵Climate and Clean Air Coalition, “Reducing Methane Emissions Across the Natural Gas Value Chain,” (November 2017), http://ccacoalition.org/en/resources/reducing-methane-emissions-across-natural-gas-value-chain-guiding-principles.   Additionally, a policy of proactive, constructive engagement with local commissions can be important, especially with less climate-cognizant commissions. Companies can also provide input through legislative proceedings during policy-setting processes or assist with the education of rule-makers such that they support best practices, creating a level playing field for companies. Participation in voluntary initiatives also demonstrates a company’s commitment to progress; however, the need for robust disclosure on tangible action remains.

Best Practice Examples: PG&E created its “Climate Change Policy Framework” in May of 2006, in which the company commits to “[lead] by example when it comes to climate change. That means more than just minimizing the greenhouse gas emissions from our operations. It also means maximizing the opportunity we have to lead on efforts to establish responsible policies and programs to address global climate change.” ⁵⁶ ✕ ⁵⁶PG&E Corporation, “Climate Change Policy Framework,” May 2006, https://www.pge.com/includes/docs/pdfs/about/environment/pge_climate_change_policy_framework.pdf   The company notes its participation in the EPA Methane Challenge Program and other stakeholder dialogues in its 2017 Corporate Responsibility and Sustainability Report. ⁵⁷ ✕ ⁵⁷Pacific Gas and Electric Company, “Together, Building a Better California,” (2017): p 130-131, http://www.pgecorp.com/corp_responsibility/reports/2017/assets/PGE_CRSR_2017.pdf, ⁵⁸ ✕ ⁵⁸David R. Baker, “PG&E Hit With $97.5 Million Penalty Over Back-Channel Talks With Regulators,” San Francisco Chronicle, (April 2018), https://www.sfchronicle.com/business/article/PG-E-hit-with-97-5-million-penalty-over-12866803.php..   PG&E further details how it plans to incorporate required CPUC standards and best practices regarding methane in its required 2018 Gas Safety Plan and its 2018 Leak Abatement Compliance Plan. ⁵⁹ ✕ ⁵⁹Pacific Gas and Electric Company, Case Document Search Results (March 15, 2018), https://pgera.azurewebsites.net/Regulation/search. Search: “Gas Pipeline Safety OIR [R.11-02-019]” from case dropdown menu; “PGE” from party dropdown menu; Dates from “03/15/18” to “03/15/18”.   While the concept that LDCs can work with suppliers to reduce emissions from further up the supply chain is relatively new, this is a practice that companies participating in M.J. Bradley’s Natural Gas Supply Collaborative are actively exploring. The participating companies include: Austin Energy, Calpine Corporation, Consolidated Edison Company of New York, CPS Energy, Énergir, Los Angeles Department of Water and Power, National Grid, NRG Energy, NW Natural, Pacific Gas and Electric Company, Vermont Gas, and Xcel Energy. ⁶⁰ ✕ ⁶⁰M.J. Bradley & Associates, LLC, “Natural Gas Supply Collaborative,” Accessed June 2018, https://mjbradley.com/content/natural-gas-supply-collaborative.  

Companies who make meaningful progress in this area and publicly communicate their actions will be well-positioned to lead the way in an energy market that increasingly values low emission operations.