I don’t intend to make every blog post here in my about climate change, but it’s such an interesting subject that sends so many numbers flying around that’s it’s hard for a math, science, and energy nerd like me to ignore. With that in mind, here’s something I came up with on the Methane Recapture Rule that might be wrong or right. Feel free to let me know how you think I did.
Back on May 10th, John McCain made news when he unexpectedly joined two moderate Republicans and 48 Democrats to maintain a last minute Obama administration rule on Methane recapture. While some have speculated that the vote may have been driven by spite over Donald Trump’s handling of the firing of former FBI Director James Comey, McCain himself had this to say about why he voted the way he did:
Improving the control of methane emissions is an important public health and air quality issue, which is why some states are moving forward with their own regulations requiring greater investment in recapture technology. I join the call for strong action to reduce pollution from venting, flaring and leaks associated with oil and gas production operations on public and Indian land.[i]
In terms of what this rule expected to accomplish, per a 2016 statement released by the EPA[ii], “The final standards for new and modified sources are expected to reduce 510,000 short tons of methane in 2025, the equivalent of reducing 11 million metric tons of carbon dioxide. Natural gas that is recovered as a result of the rule can be used on site or sold. EPA estimates the final rule will yield climate benefits of $690 million in 2025, which will outweigh estimated costs of $530 million in 2025.” For those of you playing along in the numbers game at home, a short ton is 2000 pounds, while a metric ton is 1000 kilograms, or approximately 2204.62 pounds. I’m not exactly sure why the EPA felt the need to mix their units between English and SI, but whatever, we can deal with that in an endnote later.
Methane and CO2 are both greenhouse gases. Although the effects of Methane aren’t as long lasting as CO2, it is generally considered about 20 times as effective of a greenhouse gas in the short term. That’s probably how the EPA figures cutting 510,000 short tons of Methane releases is roughly the equivalent of cutting 11 million metric tons of CO2 releases, unit goofiness notwithstanding. Assuming all this Methane was simply burned and released as CO2 would mean the savings were closer to 1.27 metric tons worth of CO2 releases.[iii]
My question is do these numbers make sense in the first place. The EPA release says the 510,000 short tons represent a 40-45% reduction of Methane releases based on 2012 levels, which would indicate that the US released somewhere around 1.2 million short tons of Methane that year. My first thought is to convert short tons to a number I care about, Standard Cubic Feet (SCF). To do this, we can multiply the number of lb-mols of Methane (63.75 million per footnote iii) by one of my favorite oil-industry conversion numbers that everyone should know: 379.5 SCF/lb-mol. This gives a seemingly crazy 24.2 Billion SCF of Methane releases in 2012. That number seems a little less crazy when you see that the US produced 25.3 Trillion SCF of gas in 2012[iv], in fact, a leak rate of <0.1% seems almost admirable. Of course, this also seems like a shamelessly SWAG’ed result which simply assumes a leak rate of 0.1%, especially since quantifying actual Methane leak rates is a notoriously difficult proposition – Almost as difficult as it would be to come up with the data to support the assertion 40-45% of those leaks can be recovered at a cost of 530 million dollars.
So how about those cost figures? If you assume that both the $530 million cost and $690 million benefit values are correct, then the rule has a healthy environmental profit margin of 30%. Of course, if I understand correctly, the O&G industry is footing the bill, so the only real case to be made is that this rule makes more sense than simply applying a $530 million dollar tax and deploying the proceeds towards carbon capture and sequestration (CCS) efforts.
Let’s start with the value driver, that $690 million dollars in 2025. Divide that number by the aforementioned 11 million metric tons of CO2 and you get a cost of about $63 per metric ton of CO2. If this is really the cheapest cost of CCS foreseen in the year 2025, then perhaps the rule makes sense economically. However, cut this cost down to $48/metric ton or less and your value driver vanishes, and you would be just as well off spending the 530 million on the cheapest available CCS technology.
Trying to Google the actual cost of CCS appears to be a difficult exercise, one that I don’t wish upon other people. Different applications of the technology in different scenarios will give many different results. The best resource I could find appears to be the IPCC Special Report on Carbon dioxide Capture and Storage, but it would suggest that for $48/metric ton you might find better value in applying CCS to new power plants. In addition to the IPCC work, a recently published Wall Street Journal article on peak oil demand showed that many oil companies are building in a cost of $30-$40/metric ton of CO2 into their future business plans, well below both the breakeven point of $48 that makes the rule profitable.
As for that $530 million number on the other side of the equation…I’m not even going to try to understand where that came from. I would be more inclined to believe the actual costs of compliance with the new regulation to be more than advertised, not less, but that’s just me editorializing on how I view the salesmanship of this particular rule. If you take the cost as stated, the math doesn’t seem to quite line up.
There’s obviously a bit of politics in play here as well (duh). It’s easier to pass a regulation advertised as low hanging fruit in the fight against climate change than to pass an actual Carbon (or in this case, Methane) Tax. The proof here is that the former was actually possible and done, while the latter appears to have very little chance at coming to fruition in the current political climate. With this in mind, an effort to do “something”, even if it does not make the most sense, trumps the desire to do the most correct thing. Also, not to be a downer, but while this number seems large, the actual carbon-offset potential of this regulation is equal to cutting Natural gas burning by less than 1% of the 2012 US gas production rate (40-45% of 20 times 0.1% of the US’s domestic gas production in in 2012). On a global scale, half a billion dollars, regardless of how it is deployed, doesn’t do a whole lot in terms of CCS.
[i] https://www.mccain.senate.gov/public/index.cfm/2017/5/statement-by-senator-john-mccain-on-blm-methane-recapture-rule
[ii] https://www.epa.gov/newsreleases/epa-releases-first-ever-standards-cut-methane-emissions-oil-and-gas-sector
[iii] 510,000 short tons equals 10.2 billion pounds of Methane, or 63.75 million lb-mols of Methane (molecule weight=16). Given that every lb-mol of Methane would stoichiometrically create 1 lb-mol of CO2, burning this amount of Methane would create about 28.05 billion pounds of CO2 (molecular weight=44), which converts to 1.27 million metric tons.
[iv] https://www.eia.gov/dnav/ng/hist/n9050us2M.htm
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