Time Has Come Today

Wednesday, 08/30/2023Published by: Housley Carr

The global push to slash methane emissions from natural gas-related operations — from production wells to end-users — and certify gas as being “responsibly sourced” has been accelerating and broadening. It now seems possible that within the next two or three years the majority of gas produced in the U.S. will be certified as responsibly sourced gas, or RSG, and that large numbers of gas buyers — power generators, industrials, LNG exporters and local distribution companies (LDCs) among them — will be buying RSG, or at least moving toward doing so. Further, an RSG market is developing (a handful of trading platforms have already been launched), as are tracking systems to ensure that gas sold as RSG is fully accounted for and legit, with no double-counting or fuzziness. In today’s RBN blog, we begin an in-depth look at RSG and its emergence from a relative novelty to the cusp of wide acceptance.

Even as many countries and companies around the world continue to ramp up their use of wind and solar power and explore the potential for a variety of renewable, low- or no-carbon fuels, there’s a growing acknowledgment that natural gas — imperfect though it may be from a climate perspective — is a readily available and relatively clean source of energy and that it will remain a significant part of the global energy mix for decades to come. A lot of this rethinking is tied to energy security. Russia’s February 2022 invasion of Ukraine provided a stark reminder to climate-minded Europe (and the rest of us, too) that while the shift to a lower-carbon economy is important it needs to be carefully paced — that it won’t do anyone any good to have an entirely “green” grid that produces only a fraction of the energy the world needs.

With all that in mind, there are a variety of efforts underway to make the natural gas piece of the global energy puzzle as clean as it can be. The primary focus of these efforts is on reducing as much as possible the amount of methane (CH4) — the main ingredient in natural gas — that is released into the atmosphere along its route from the production well to the end-user’s burner tip. There’s good reason for zeroing in on methane emissions. Methane is a particularly potent greenhouse gas (GHG), with 84 times the atmospheric heat-trapping effect of carbon dioxide (CO2) over the short term (five to 20 years). That means reducing methane emissions along the gas value chain has quick and very positive climate effects.

Which brings us to RSG, a topic we first discussed a couple of years ago in Better Way. As we said then, RSG is natural gas that an independent third party has certified as being produced, gathered, processed, transported and/or distributed in a way that meets higher environmental standards. (We compared RSG to an organic tomato or a shot of Grey Goose vodka — a seemingly better, premium-priced version of a commodity.)

Methane Monitoring Equipment. Source: Project Canary

Again, we should acknowledge two things up front. One is that, for either RSG or plain-old natural gas, the volumes of CH4, CO2, and other GHGs generated from the production wellhead to the point where the gas is to be burned pale in comparison with the massive volumes of GHGs released by the combustion of that gas by end-users. For that reason, many environmental activists openly question the real value of RSG. (Some also question the efficacy of various methane-detection devices.)

Further, there’s the physical reality that while a producer, a pipeline company, and an LNG producer or LDC may reach a deal to supply, deliver, and receive X amount of RSG per day, that RSG is blended in the pipeline with “non-RSG” gas from other sources and the end-user in fact receives a mix of RSG and non-RSG gas molecules. The situation is similar to electricity customers who agree to pay a premium to receive green power from their supplier. In fact, the electrons that make it to their homes and businesses are from a broad mix of regional generation sources, including (depending on the location) plants powered by uranium, coal and natural gas, as well as from hydroelectric plants, wind farms and solar facilities.

There’s so much more to think about and discuss. For example, what drives a gas producer to seek RSG certification for its gas, or a gas-pipeline owner or LNG producer to pursue RSG certification for its infrastructure? Why would an LNG producer, an LDC or a large industrial company want to buy RSG? Does everyone agree on the standards used in certification? (Spoiler alert: No.) Are there regulations in the works to govern RSG standards? Is there a market in place for trading RSG, or a mechanism for verifying and tracking RSG and avoiding double-counting? And what sort of price premiums are being paid for RSG?

There are no quick-and-easy answers — it’s a complicated topic, with differences of opinion and a number of things that still need to be worked out. Our aim in this blog series is to provide what you might call a comprehensive overview, a drone-level view of RSG World.

It’s probably best to start with motivations. Many policymakers see the potential for carefully structured, aggressively managed RSG efforts to significantly reduce methane emissions within the not-so-distant future. As we said earlier, methane is a whopper among GHGs, having a rapid and outsized — albeit relatively short-lived — effect on the atmosphere’s heat-trapping ability. (CO2, in contrast, has a slower but more lingering effect, lasting hundreds of years.) According to the International Energy Agency (IEA):

At the United Nation’s Global Climate Change Conference in Glasgow, Scotland, in November 2021, the U.S. and the European Union (EU) initiated the Global Methane Pledge (GM ... never mind, too many acronyms!), which has to-date been signed by 150 countries. Signing countries committed to work together to collectively reduce methane emissions by 30% below 2020 levels by 2030. (That may not sound like much of a cut, but it’s said to have a similar climate impact as the entire global transportation sector adopting net-zero emissions technologies.) Then, in June 2022, a subset of the signers — including the U.S., the EU, Canada, Mexico, Japan, Argentina and Nigeria — launched the Global Methane Energy Pledge Pathway to take the further step of committing to capture “the maximum potential of cost-effective methane mitigation” in the oil and gas industry and to eliminate routine flaring “as soon as possible, and no later than 2030.”

(The U.S. government has taken several steps to meet its methane-reduction commitments. We‘ll discuss those in an upcoming blog.)

As for natural gas producers, pipeline companies, LNG producers, LDCs and industrials, their motivations for reducing methane emissions and securing RSG status for their gas are varied and multifaceted. For many, meeting certain GHG-reduction targets is part of their broader ESG-related efforts. For others, the main driver may be more economic — gas molecules that escape into the atmosphere represent lost revenue, and gas molecules certified as RSG sell at a premium (typically a few cents per MMBtu). And, from a practical standpoint, if increasing numbers of gas buyers want to buy certified RSG, doesn’t it make sense for a producer to give the market what it wants?

And there’s this: In the year and a half since Russia’s attack on Ukraine, the U.S. in particular has become a critically important LNG supplier to Europe, and exports of U.S.-sourced gas to Europe are expected to rise further as new LNG export capacity comes online along the Gulf Coast. We think it’s likely that European buyers will be among the first to insist that the gas in their LNG is certified as RSG, and that RSG will, over time, become the standard for LNG exports.

Before we conclude Part 1, we should note that while reducing methane emissions may be at the heart of the RSG “movement,” some RSG certification approaches consider other factors, such as CO2 emissions and more general environmental practices, such as land and water use. Also, some gas-market participants promote other, pro-climate aspects of their work as evidence that they are providing lower-GHG gas molecules. For example, NextDecade, developer of the Rio Grande LNG export project in Brownsville, TX, has committed to reducing CO2 emissions from its facility (now under construction) by more than 90% via carbon capture and sequestration (CCS), and to powering the liquefaction plant with renewable energy.

In the next blog in this series, we’ll look at how gas-related operations are monitored for methane emissions and the steps that producers, midstreamers and others take to reduce emissions. We'll also look at the three primary RSG-certification entities and the approaches they take. After that, we’ll look at the steps and commitments that individual companies have taken regarding RSG; the emerging regulatory landscape; a new RSG trading hub; and the proposals and plans for tracking RSG through the value chain to guard against double counting.

Want to know more about RSG and having trouble sifting through the hype available online? Join us for our School of Energy on September 19 and 20 in Houston where we’ll have Rock Graham, Manager of Origination at NRG and one of the few people alive with real-world experience on how RSG markets really work, speaking about what’s really going on and what you need to know on RSG.

“Time Has Come Today” was written by Joe and Willie Chambers and appears as the fifth song on side two of the Chambers Brothers’ debut album, The Time Has Come. Joe Chambers wrote the lyrics for the song after attending a lecture at UCLA by counterculture philosopher Timothy Leary. The song is a call to action in the fight for social justice during the tumultuous times of the late 1960s. It was originally recorded by the band in 1966, clocking in at a short 2:27 in length. The band re-recorded it in August 1967, with the full-length album version lasting just over 11 minutes. This version features a high hat with tambourine attached and a cowbell as the main percussive instruments in the song. It presents a lysergic whirlwind of sounds that includes heavy use of tape delay and reverb. The midsection of the tune has fuzzed-out guitar that sounds like angry hornets, amidst howling and screams, all drenched in tape delay that would have put Sam Phillips on a different astral plane with his experiments with slap back tape echo at his studio at 706 Union Avenue in Memphis in 1955. Did someone say, "more cowbell?", well alrighty then ... my soul has been psychedelicized!

Released as a single (at 4:45 running time) in December 1967, it went to #11 on the Billboard Hot 100 Singles chart. The full 11:06 LP version was a staple of progressive FM radio stations in the late 1960s, only rivaled by “In-a-Gadda-Da-Vida” for deejays in need of a bathroom break during airtime. The song has appeared in multiple motion pictures and television shows and has been covered by many artists over the years. Personnel on the record were: Lester Chambers (vocals, percussion), Joe and Willie Chambers (guitars), George Chambers (bass, vocals), and Brian Keenan (drums, percussion).

The Time Has Come LP was recorded in Los Angeles between August 1966 and August 1967, with David Rubinson producing. The album was released in November 1967 and went to #4 on the Billboard 200 Albums chart. Two singles were released from the LP.

The Chambers Brothers are an American psychedelic soul band originally from Carthage, MS — they relocated to Los Angeles in the mid-1950s. They started their career playing folk and gospel music but switched to electric guitars and an edgier rock and soul sound in the Vietnam era. The group in its prime consisted of brothers George, Joe, Lester, and Willie Chambers, along with Brian Keenan. They have released seven studio albums, seven live albums, 10 compilation albums and 10 singles. The band still plays occasional shows in the Los Angeles area. Drummer Brian Keenan died in 1985 at the age of 42. Bassist George Chambers died in 2019 at the age of 88.