REGULATION

Who are the Big Ten in the carbon pollution business?

What ties America's second-biggest energy company, ConocoPhillips Co., to a small Houston-based shale driller, Halcón Resources? They had some of the worst rates of carbon pollution among their peers in 2012.

Oil and gas operations have come under scrutiny for their climate impacts primarily because they leak methane, a potent greenhouse gas. The fossil fuel sector is the second-biggest emitter of the gas, which is 86 times as bad as carbon dioxide for the climate on a 20-year time scale. Where carbon dioxide works over centuries to wreak climate havoc, methane is its cousin on speed, working rapidly before decaying into less virulent gases. For climate change, both gases matter.

Halcón, whose name means "hawk" in Spanish, is a company founded just two years ago by Floyd Wilson, a wildcatter who sold his previous company, Petrohawk Energy Corp. (the first to drill in the Eagle Ford Shale), to BHP Billiton for an astounding $15.1 billion in 2011. Halcón emitted 6.8 metric tons of carbon dioxide equivalents of methane per million cubic feet (mtCO2e/MMcf) produced at the wells it operated. It was the dirtiest producer among the nation's top 40 energy companies in 2012.

In comparison, Houston-based ConocoPhillips is a multinational energy company with operations around the world, and it owned $117 billion in assets in 2012. The company emitted at about half Halcón's rate, but its presence in the top 10 is remarkable given that comparable multinational companies like Chevron Corp. and Exxon Mobil Corp. were cleaner.

Bill Barrett Corp., Unit Corp., SandRidge Energy Inc., BreitBurn Energy Partners LP, Cabot Oil & Gas Corp., Linn Energy LLC, Cimarex Energy Co. and QEP Resources Inc. rounded out the top 10 worst polluters among the biggest 40 companies by assets (see sidebars).

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It is a complicated process to identify the companies that emit the most methane per unit of oil and gas produced. Parent companies control thousands of wells in the U.S. through a network of subsidiaries. A well that is being drilled may actually be owned by two or more companies that have a working interest in the well. So the oil and gas extracted is split among a group. That leaves open the philosophical question: Which of the companies is responsible for the leaking methane?

The question means little to Larry and Elva Barr, an elderly couple who live 200 yards away from a well pad in Wetzel County, W.Va. They live in a valley, and any fumes from the pad reach them directly.

In August last year, the company operating the well left a valve open on a production tank. Fumes curled away, reaching the Barrs, who complained. The company soon stopped the leak.

But during the hourlong episode, enough methane poured out of the tank to equal the annual emissions of five cars, according to a notice of violation issued by the West Virginia Department of Environmental Protection. Since methane is co-emitted with toxic volatile organic compounds, such events also pose a public health threat.

"They did not want their grandchildren to play outside during this unique episode," recalled Bill Hughes of the Wetzel County Solid Waste Authority, who helped the Barrs deal with the situation.

ClimateWire assumed that the company operating the well is responsible for the releases of methane. The emissions data were obtained from U.S. EPA's Greenhouse Gas Reporting Program, a database to which companies annually report emissions from the fields they operate. Production data were obtained from the U.S. Energy Information Administration through a Freedom of Information Act request. The data and calculations were cross-checked with some of the companies for verification and refined based on their feedback. (For detailed methodology, refer to sidebar.)

The worst polluters have little in common when it comes to the scale or nature of operations. The implication is that companies do not all tackle the methane problem with equal seriousness, especially in the absence of comprehensive regulations. In the current regime, companies can choose to do better or worse.

A policy under study

This is significant now because the Obama administration is contemplating whether the methane leaks should be regulated under the Clean Air Act. If regulations do happen, companies will have to invest to plug leaks and make well pads more efficient. That would increase expenses at a time U.S. drillers are spending more money than they are earning back at their wells, as reported by Bloomberg last month.

The American Petroleum Institute, an industry group, has opposed regulations, saying the industry is capable of policing itself. But as the ClimateWire analysis shows, self-policing does not work uniformly well across the industry.

Most companies contacted by ClimateWire said they are proactively addressing methane leaks. Some said they had leak detection programs in place and were replacing leaky equipment and running more efficient operations. Some also said that the emissions they reported to EPA in 2012 were not reflective of real-world conditions and that their high emissions are an artifact of the calculation methods required by EPA.

Halcón Resources, the worst offender in 2012, had high emissions in the East Texas basin that have since been rectified, Kelly Weber, director of corporate communications, said in an emailed response to questions. In 2013, the company reported 91 percent less emissions from the basin. She would not disclose why emissions were so high in 2012.

"Environmental stewardship is a top priority for Halcón Resources," she said. "We continually strive to reduce emissions in all our operating areas."

Until 2011, greenhouse gas emissions from oil and gas went untracked by regulatory agencies; no one knew how much companies were emitting. Then EPA began requiring the industry to report its emissions under the Greenhouse Gas Reporting Program.

The program usually tracks facilities that emit more than 25,000 metric tons of greenhouse gases per year -- large power plants and such. Individual well pads, like the ones near the Barrs, would not qualify. So EPA asked energy companies to sum up emissions from all their wells and report that instead.

An 'astronomical' challenge

It was a huge challenge, said Jerry Farmer, environmental manager at Oklahoma-based Unit Corp., which owned $3.8 billion in assets in 2012. Each time a worker completed a process or made an error that caused a leak, Farmer had to compute the emissions. He had to also count the number of valves and other devices his company owned. And for that, he had to educate workers at the thousands of well pads owned by Unit to report to him.

"There are so many data points that it is astronomical," he said.

EPA's goal was to track the progress companies make in cutting emissions. In 2011, the oil and gas industry emerged, hands down, as the single largest methane emitter in the United States. (In 2013, the industry was the second-largest emitter.)

Meanwhile, scientists began sniffing around well pads from mobile vans, flights and tall towers and found that some operations may be leaking more methane than EPA was saying (ClimateWire, June 26).

This threw a wrench in the Obama administration's all-of-the-above energy strategy. Natural gas burns cleaner than coal in the power plant, which had prompted the administration to favor it as a bridge to a cleaner energy future. But studies were suggesting that unless methane leaks are curbed during production, the fuel may be as dirty for the climate as coal.

Since then, EPA has been looking for avenues to curb leaks. The agency indicated earlier this year that it may issue new regulations under the Clean Air Act, but it has, in recent months, appeared to dial back its zeal (EnergyWire, May 21; EnergyWire, March 31).

The open question now is whether the industry can regulate itself. As the ClimateWire analysis shows, some companies are doing a better job at it than others.

Creaky, leaky equipment

ClimateWire looked only at the biggest 40 companies by assets in the U.S. These companies contributed about half the methane emissions in the production sector.

Thousands of smaller companies contributed the remaining emissions, and some of these might be extremely inefficient. However, the analysis was restricted to the Big 40 under the assumption that the most profitable companies can best afford cleaner operations.

The analysis helped pinpoint outliers -- the operations and basins that were emitting unusually high amounts of methane in 2012 (see sidebar). An oil field is a complex industrial facility with equipment and processes with names like "centrifugal compressors" that evoke the clang of heavy machinery.

Some of this infrastructure may be old, like in the San Juan Basin of New Mexico, where the first well was drilled in 1901. The San Juan is the leakiest basin in the U.S., and it contributed 14 percent of all the industry's emissions in 2012.

But aging equipment is only part of the reason for the emissions. Jim Winchester, communications director at New Mexico's Oil Conservation Division, pointed to the type of natural gas produced there. The San Juan contains coal seams laden with natural gas, and thousands of coalbed methane wells dot the region. These wells leak more than other types of gas wells, Winchester said in an email.

"It would seem logical that the largest coalbed methane basin in North America would be No. 1 in methane emissions," he said.

New Mexico does not regulate emissions of greenhouse gases, so companies are not required to address methane leaks.

'Venting' water-filled wells

As much as 60 percent of San Juan's total emissions in 2012 came from a single company: ConocoPhillips. In fact, the company's San Juan operation was responsible for 9 percent of the 49.5 million metric tons CO2e of methane from the industry onshore and offshore.

ConocoPhillips owns 6,686 coalbed methane wells and another 4,554 oil and gas wells in the San Juan, according to New Mexico's Oil Conservation Division. The company's portfolio of wells makes it, by far, the largest producer of gas in the basin. That's why it emits so much, said ConocoPhillips' Jim Lowry, director of communications. More wells means more emissions.

The company's San Juan operation vaults it into the top 10 worst methane polluters; its peers do not own as much acreage in the San Juan.

Much of ConocoPhillips' emissions in the San Juan come from when workers vent a well. Gas wells fill up with water once in a while. To deal with this, operators let the water flow out, and, at the same time, they vent methane into the atmosphere.

Lowry stressed ConocoPhillips has many programs in place to tamp down methane emissions. In fact, the company had cut its U.S. emissions by 2 percent in 2012 and its San Juan emissions by 5 percent, he said.

"ConocoPhillips is always looking for ways to operate more safely, efficiently and responsibly," he said.

Reporting challenges

Some companies contacted by ClimateWire blamed their high rates on EPA's Greenhouse Gas Reporting Program database, which they said was rudimentary in 2012. It was only the second year EPA was collecting greenhouse gas information.

Farmer at Unit Corp. recounted the challenges he faced in getting a handle on the database. Initially, he was assigned a software by his company that did not calculate methane emissions properly, he said. And when he input data into the program's website, it spit out anywhere between 10 and 100 errors, he said. When he finally hit submit, Farmer was proud of his efforts. Unit is far better than its peers at tracking its emissions, he said. So it was not so much that Unit was bad in 2012 -- it was that other companies were worse.

"When I go to industry meetings and talk to other folks, they are still trying to get people to record when they vent a well," he said. "They are not reporting any of that stuff, so therefore they are not calculating any of that stuff."

Winter smog in Utah and Wyo.

Most companies said they were proactively addressing leaks in Colorado, Ohio, Utah, Wyoming and Pennsylvania, where either law or the procedure for getting air permits requires emissions monitoring.

Bill Barrett Corp., a Colorado-based independent that had $2.9 billion in assets in 2012, has a program to detect methane leaks at well pads in the Denver-Julesburg Basin in the state. The company has switched leaky pneumatic valves with low bleed devices and electronic ones that emit far less methane, said Rusty Frishmuth, environmental, health and safety manager at Bill Barrett.

It also has monitoring programs in Utah and Wyoming, said Barry Schatz, air quality specialist at Bill Barrett. In the Uintah Basin of Utah, oil and gas well pads emit so much volatile organic compounds (and methane) that they create wintertime smog. The state regulator has companies on a tight leash on how much VOCs they can emit (Greenwire, Oct. 1).

Similarly, in the Pinedale valley of Wyoming, a region with all of 8,800 people and very little road traffic, wintertime has brought smog with the snows. Natural gas fields are the culprit. Bill Barrett uses infrared cameras to detect leaks every quarter in accordance with air permit requirements in the state.

Frishmuth said the company trains workers to sniff, see and hear leaks at its well pads. The technique is good for detecting major leaks, but smaller ones could go unnoticed.

In Pennsylvania, Cabot Oil & Gas has a leak detection program in lieu of getting an air permit under a rule exemption, said George Stark, director of external affairs at Cabot. Cabot also has a program in Colorado.

The company, which was worth $4.6 billion in assets in 2012, operates primarily in northeast Pennsylvania. It has also made other efforts to cut leaks, especially from flaring, Stark said. For example, it is installing more pipelines to gather the gas and take it to market, he said.

Small independents face other challenges in tracking their leaks, such as the size of their environmental units. For example, Unit has a small environmental department. Where a multinational oil company like Exxon Mobil might have hundreds of employees in its environmental compliance division, Unit has just one.

"We are a small operator -- it is me," Farmer of Unit said. "It's just a different world. It's no excuse, but what we've done, we're very proud of."

Ultimately, companies would prefer to avoid regulations since they increase paperwork and administrative costs, said Frishmuth of Bill Barrett.

The direction EPA will go will be revealed this year, and if it decides to regulate, new rules will be in place by the end of 2016.

Twitter: @gayathriv | Email: gvaidyanathan@eenews.net

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