Shale producers seek a green label for their natural gas
Under pressure over climate change, firms borrow an idea from the food industry
Some shale drillers want consumers to know that their natural gas was sustainably fracked.
Many of the companies behind the U.S. shale boom are stepping up efforts to reduce greenhouse-gas emissions, toxic wastewater and other environmental impacts tied to fracking, amid mounting investor pressure over climate change.
Now, drillers such as Southwestern Energy Co. and BP PLC are seeking to monetize those investments by marketing their natural gas as a cleaner fossil fuel, akin to organic vegetables or fair-trade coffee.
“It’s the same molecule. But it’s not so much about what we produce, but how we produce it,” said Mark Boling, a former executive at Southwestern, which last year reached a deal for gas touted as responsibly produced, selling it to utility New Jersey Natural Gas Co.
In Texas, BP is testing blockchain technology that would allow its gas to be tracked through the supply chain, enabling customers to know when they are buying BP-fracked fuel. The oil giant is investing in technology to limit methane leaks, and it is part of the Oil and Gas Climate Initiative, an industry organization whose members have pledged to collectively cut average methane emissions to less than 0.25% of gas sold by 2025.
“We do all the work on the ground to differentiate what we produce,” said Brian Pugh, chief innovation officer for BP’s U.S. onshore business.
Some environmental groups say that regulation, not green marketing, is the way to ensure sustainable practices. Unlike fair-trade standards or federal rules that govern organic labeling, there is no widely accepted industry definition for responsibly fracked gas.
“It’s hard not to be dismissive,” said Andrew Logan, senior director for oil and gas at Ceres, a nonprofit focused on sustainability. Part of the demand for greener gas is being driven by utilities, which are looking for more information on the gas they purchase as they seek to satisfy growing consumer demand for cleaner energy. Richmond, Va.-based Dominion Energy Inc. launched a procurement process this year for gas deemed to have been responsibly sourced, and Vermont Gas Systems Inc. plans to release a request for proposals in the fall.
Vermont Gas hopes that responsibly fracked gas ultimately will become its standard offering. “Our goal is to stimulate responsible production and transportation,” Chief Executive Don Rendall said. The initiatives would piggyback onto more-established programs that charge customers a premium for methane produced by landfills and farms, dubbed renewable natural gas.
Vermont Gas began offering the fuel to customers last year in a program that takes after renewable electricity offerings. The average residential customer would pay an additional $88 (U.S.) a month for all of their gas to come from facilities such as landfills or farms, or an extra $10 a month for 10% renewable natural gas, according to the company’s calculator.
Institutions such as Middlebury College and the University of Vermont Medical Center have committed to purchasing the gas, which qualifies as a biofuel under the federal Renewable Fuel Standard, to meet sustainability targets. Methane, the primary component of natural gas, is far more potent than carbon dioxide in contributing to climate change, meaning it is better for the environment to capture and burn it than to allow it to escape directly into the atmosphere.
Dominion is joining Smithfield Foods Inc. to develop the infrastructure to collect roughly 3 million cubic feet a day of methane from hog farms in Utah, North Carolina and Virginia, said Gary Courts, Dominion’s general manager for new gas business development. The company estimates that is enough to power about 14,000 homes and businesses.
“Our world is changing, and what we find is our customers want different things,” Mr. Courts said. But even as companies invest more in capturing gas from farms and landfills, supplies remain limited. As of 2017, U.S. facilities had the capacity to produce about 85 million cubic feet of renewable natural gas a day, according to data from Argonne National Laboratory, a federal research center outside Chicago.
That’s equivalent to less than 1% of the nation’s daily gas output, most of which comes from fracking.
Some groups are working to develop credible standards to declare certain sources of gas as greener than others. Criteria for responsibly fracked gas have included leak rates, water contamination levels and engagement with area residents.
In Southwestern’s case, those were evaluated by ratings firm Independent Energy Standards Corp. New Jersey Natural Gas Co. agreed to pay an undisclosed premium for responsibly produced Southwestern gas. The fuel made up14% of the utility’s supply, according to a spokesman, who said the company closed a second deal with Southwestern in May. New Jersey Natural Gas doesn’t market this greener gas to customers separately or charge more for it. Instead, the fuel helps the company meet internal environmental targets.
Hervé Mahé, a restaurant owner in Burlington, Vt., said he potentially would be interested in buying greener gas, but would want to know more about how the extraction process affected neighboring communities.
“Whenever you think fracking, you don’t think clean,” said Mr. Mahé, a Vermont Gas customer. “At this point I’m not sure I would believe them until they prove it.”
Drillers are marketing natural gas as a cleaner fossil fuel, akin to organic vegetables or fair-trade coffee