Analysis by Energy Workforce President Tim Tarpley
In a move that could have significant implications for the U.S. energy services sector if ultimately enacted, word came out late last week that the Department of Energy (DOE) may be exploring a plan to offer a government endorsement for natural gas that meets a minimum standard for cleanliness.
While details of this plan are still quite vague, from the details that have been discussed publicly it sounds like it could, if enacted, be a sort of “energy star” rating for natural gas. Conceptually, such a standard could mandate that gas must be produced in a particular way following certain procedures and standards that would be higher than typical standards for production. This could include limitations on flaring and methane mitigation procedures, among many other possibilities. DOE would then certify gas produced following these procedures as “clean” natural gas.
Reports from within the agency are that the intention of the plan is to create a standard that would allow U.S. gas producers to remain competitive in the global marketplace among increasing demands for so called “responsibly sourced gas.” In fact, a number of companies have sprung up to certify the carbon footprint of natural gas collected in Texas, New Mexico and other places, and some companies in the midstream sector have tried to come up with their own industry standards. So far, none of these standards have caught on in the market. Part of the issue is that there is no agreement on what the standards should be or who certifies them. A government standard, even if completely voluntary, would likely be much more relevant to the industry and the natural gas market as a whole, as it could potentially alleviate that issue.
“They’re talking about trying to develop a framework that will ultimately allow those certified gas folks some sort of floor, a minimum of what the regulatory framework needs to be to meet that criteria,” said an industry executive, who was granted anonymity to discuss a government initiative that hadn’t been publicly announced. “Consistency of measurement is a big thing.”
Reports are that DOE is apparently looking to meet with industry representatives along with environmentalists at CERA Week.
DOE has not released any details of the plan or even formally confirmed that it exists, however late last year, DOE held a workshop that brought technology companies, firms that can assess the methane intensity for producing and distributing natural gas, electric utilities and other players together. Conceivably, this meeting could have served as an initial step towards the creation of a new standard.
Quite a bit remains to be seen about the implications of this proposal. It appears to be a significant undertaking for DOE, or any agency for that matter, to put together such a national standard, and the implications of getting it wrong could be significant. Market distortions could be created if standards were such that it raised the costs of U.S. production significantly in relation to competitors abroad. New standards could also have inflationary effects back home for domestic sales of natural gas, which many Americans rely on for heating, cooking and power production in many areas.
Energy Workforce will continue to follow the evolution of this rule closely and ensure the energy services and equipment sector is part of the discussion as it moves forward, as it could have major implications to our business.
Tim Tarpley, Energy Workforce President, analyzes federal policy for the Energy Workforce & Technology Council. Click here to subscribe to the Energy Workforce newsletter, which highlights sector-specific issues, best practices, activities and more.