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EXECUTIVE PERSPECTIVE: How the U.S. can lower methane emissions from natural gas and save money

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A new WRI study finds that there are many win-win opportunities for the United States to reduce emissions and save money for consumers and businesses. Our blog series, Lower Emissions, Brighter Economy, evaluates these opportunities across five key areas—power generation, electricity consumption, passenger vehicles, natural gas systems and hydrofluorocarbons (coming soon) —which together represent 55 percent of U.S. greenhouse gas emissions.

Today, the Environmental Protection Agency (EPA) announced its plan to rein in methane emissions from new and modified oil and natural gas infrastructure. As domestic oil production increases and the United States becomes increasingly reliant on natural gas for electricity and industrial uses, it is essential to take advantage of proven measures to reduce methane emissions. While natural gas emits only half as much carbon dioxide as coal when used for power generation, methane leaks during production can undermine this climate benefit.

The new rules from EPA, expected this summer, will help the U.S. achieve its climate goals, but more can be done. New research shows that through additional policies, federal and state governments and businesses can encourage investment in cost-effective technologies that rein in methane leakage, helping the natural gas industry save money while reducing harmful air pollution.

The Problems with Methane Leakage

Natural gas is predominately made up of methane, a greenhouse gas at least 34 times more powerful at trapping heat than carbon dioxide. Methane leaks occur throughout the natural gas supply chain, from drilling wells to production and processing to the way gas is transported and used by customers. EPA estimates that natural gas systems leaked about 1.2 percent of the methane that passed through them in 2012, but many recent studies suggest the rate may be much greater, perhaps 3 to 10 percent.

Though the exact leakage rate is uncertain, the negative impacts of methane leakage are clear. Even at a 1.2 percent leakage rate, natural gas companies would emit the same annual amount of greenhouse gases as 32 million cars or 40 coal-fired power plants. Methane leaks are also often accompanied by toxic gases and volatile organic compounds, which can contribute to respiratory illnesses and other health problems. And finally, lost methane is lost product, so the more methane leaks, the more money natural gas companies lose.

What EPA’s New Rules Will Accomplish

As part of President Obama’s Climate Action Plan, EPA is working to reduce methane emissions, including from oil and natural gas systems. Today’s announcement marks the first time EPA has used its authority under the Clean Air Act to address the problem of methane emissions. Through a combination of cost-effective measures that build on white papers issued for public comment last year, EPA has set a goal of cutting methane emissions from oil and gas operations by 40 to 45 percent below 2012 levels by 2025.

It Pays to Rein in Methane Emissions

There are cost-effective technologies to reduce leaks from all aspects of natural gas development. Most pay for themselves in three years or less. Voluntary measures to reduce methane leaks have already increased natural gas sales revenue by more than $264 million, according to EPA. And studies show that the natural gas industry could save more than $1 billion per year by capturing additional wasted gas.

So Why Aren’t Companies Using these Cost-Effective Technologies?

Thousands of independent companies operate throughout the natural gas supply chain. Smaller contractors and service providers often don’t actually own the gas that flows through their equipment, and as a result, they lack incentive to invest in equipment that reduces leaks, since they won’t share in the revenue from selling additional gas. The lack of effective emissions monitoring means many companies may be unaware of how much of their valuable product is being wasted.

Additional Policies Are Needed

Federal agencies can help drive investment in technologies that reduce methane leakage, and EPA’s intention to propose new methane standards this summer is a great start. Yet there is more that both EPA and other agencies can do to rein in methane emissions. For example, EPA should:

· Go after existing sources of methane emissions. Retrofitting existing equipment and performing leak detection and repair can achieve further emissions reductions without causing undue burden for industry. Previous research by WRI and others suggests that further reductions are possible with current technology and at little to no cost to industry.

· Address methane directly from all sources. Methane is the primary component of natural gas, especially after processing strips out many impurities. Targeting methane directly will ensure that companies achieve the full methane reduction potential, while still making important reductions in local air pollution.

Other policies that could complement new standards include:

· Agencies like the Federal Energy Regulatory Commission and EPA should work with industry to revise contracts so that companies throughout the natural gas supply chain can share in the savings from reducing wasted gas.

· The Department of Energy should continue to research and develop technologies that measure methane emissions and cut down on leaks, driving down the cost of this equipment for natural gas companies.

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