Railroad commissioner vents at France
Wayne Christian, one of three Texas Railroad Commission members, seems to have just about had it with the French. And the Russians. And the Iranians.
His latest missive — “An Assault from All Fronts on Energy Independence” — wasn’t published in all-caps; but it reads like the original draft was hammered out with the caps-lock on.
A little backstory: Texas has a problem with flaring and venting of natural gas, whereby unwanted gas (mainly from oil wells) is burned off or just released into the air. As shale oil production boomed in the Permian Basin, so did flaring and venting; in recent years, more Texas gas has gone up into the heavens than has been used in the state’s homes.
Since natural gas releases carbon when burned and methane is a potent greenhouse gas on its own, these both exacerbate climate change. Last February, the commission felt compelled to issue a study defending its practice of handing out flaring permits with abandon. In November, it gave some ground and voted to update the application process; from April, producers will have to file more documentation justifying their need to flare gas.
This fell short of what environmentalists, several large fund managers and even some oil majors wanted. The French are also nonplussed, apparently. Engie SA, a French utility, broke off negotiations for a U.S. liquefied natural gas contract, reportedly under pressure from a French government — which owns 24 percent of the company — concerned about fracking and methane emissions.
This was, it seems, the final straw:
France is going to have to get its natural gas from somewhere, and wherever it is it’s going to cause more harm to the environment and geopolitics. The French may get their natural gas from Iran, which has dangerous nuclear ambitions and has threatened to blow up Israel several times. Or they could turn to Russia, which has dangerous ambitions and invaded Crimea just a couple of years ago. Or they could look to the Middle East, a region not exactly well known for its respect of Western legal traditions.
Christian writes, “less than a half percent of the gas produced in Texas was flared or vented,” according to an announcement made last August. That announcement specified that figure applied to the month of May 2020 — an interesting month.
While he overstates his case by choosing the period when the Saudi-Russian price war and COVID-19 sent the oil business into freefall, flaring is less intense than it was. Artem Abramov, who heads shale research at Rystad Energy, said the collapse in activity accelerated an existing decline in flaring. He estimated 1.6 percent of Permian gas was flared in the fourth quarter of 2020 — triple Christian’s statewide figure for May but way down from the 4 percent to 5 percent level seen in late 2018 and much of 2019.
Yet there is no room for complacency. It remains to be seen how much flaring and venting comes back as fracking recovers; drilling and completion activity in the Permian and Eagle Ford basins in November was still 65 percent to 70 percent below the level of a year before.
The point is, Texas must earn its place in a competitive global market, not simply demand everyone get with the program. On this front, Christian’s dismissal of climate change concerns doesn’t bode well. He centers his criticism on the Paris Agreement, repeating a tired (and debunked) talking point from the Trump administration about its minimal impact on global temperature. Christian also touts U.S. gas as “affordable.” But such apparent affordability is partly because its emissions go unpriced — and at least some buyers now factor that in.
Yes, shale gas helped to cut U.S. carbon emissions by displacing coal-fired power (although methane leaks associated with fracking undo at least some of the benefit). But that doesn’t mean gas is assured of its place from here as emissions standards tighten and competing renewable energy technologies are deployed at different rates around the world.
The Texas Railroad Commission’s willingness to hand out flaring permits by the thousands every year helped the industry, effectively offloading the cost of dealing with greenhouse gas emissions to the general public.
Superficially, that helps the industry the commission is tasked with regulating. But the reality is that it encouraged the impulses that destroyed the frackers’ balance sheets and their relationship with investors. If U.S. gas is to be truly competitive in a world where supplies are plentiful but tolerance for emissions is dwindling, the industry must ditch drill-baby-drill. When buyers (and investors) have options, they make demands. Characterizing that as an assault may be good for venting, but not much else.