Renewable energy will be the focus of unprecedented levels of funding delivered through the recently passed Inflation Reduction Act in the U.S. Billions of dollars are likely to be dispensed in the form of tax exemptions and loan guarantees to operators and producers of alternative energy sources, which continue to struggle to achieve the scale and commercial viability needed to meet the insatiable energy demand by businesses and people alike.
In the meantime, the world’s reliance on fossil fuels continues. Oil and gas producers met two-thirds of the U.S. energy demand in 2021. Yet the upstream industry, particularly small and mid-sized producers and operators, continue to face significant challenges when it comes to managing compliance with both a growing range and variety of GHG-related thresholds and the numerous reporting formats.
Channeling some of the EPA’s funding windfall — a whopping $1.5 billion — into the greater standardization of emission thresholds and reporting formats would go a long way to supporting a key segment of energy producers. It would only be fair when the oil and gas sector has been the target of far greater attention around unplanned emissions than other industries and manufacturers across the U.S. that experience similar leaks and spills.
The lack of standardization in federal or state emission thresholds means operators are usually dealing with multiple agencies when reporting incidents. For example, the Railroad Commission of Texas requires reporting on a liquid release or spill of a certain volume, yet gas leaks must be reported to a different agency. Spills impacting bodies of water are reported to yet another agency, the EPA or the Texas General Land Office.
The situation is even more complex for companies operating wells in multiple basins and states. For spills or unplanned venting, for example, they can face different limits on what needs to be reported in Wyoming, Colorado and Louisiana. With many producers operating in more than one basin, the resulting convolution of thresholds and agencies is overwhelming the capacity of some smaller operators to provide the required data in a timely and cost-effective way.
Environmental reporting formats also need more standardization. Many state agencies are making efforts towards digital transformation and an increasing number offer reporting forms that can be filled in and submitted electronically. However, others suffer from chronic underfunding and a lack of staffing that makes the transition to electronic formats and submission regimes challenging. Consequently, many forms continue to be offered as printable Word documents, filled out in pen by someone in the field.
The reality for most small and mid-sized operators is that compliance with spill and leak reporting requirements is often just one of the responsibilities juggled by one or two persons, most of whom are wearing multiple hats in their Health, Safety and Environment departments. Many require the support of a consultant or outside contractor to help them navigate protocols and have any hope of complying with the requirements of different regulatory agencies, reporting channels and differing formats state to state.
Digitalization is the obvious route forward in making substantive improvements to standardization of GHG and emission performance and reporting. The in-house digitalization of operations and reporting is well underway at large oil and gas producers, allowing them to reduce waste and optimize outputs as a way to reduce climate impacts, as well as demonstrating as much to investors.
Yet adoption of digital technologies has been much slower by smaller operators. It would be worthwhile for governments to support them in adopting technology that simplifies their GHG emissions workloads and make it easier to focus on the business of optimizing operating performance and reducing wastes at source. The Inflation Reduction Act may further add to encouraging greater adoption of technology to identify, notify and track repairs of emissions.
Any investments in the standardization of thresholds as well as emissions reporting mechanisms would make it much simpler for operators to align production with climate-related targets and achieve regulatory compliance.
With so much new money now on the table, an investment in standardization offers a ‘win-win’ for the sector and for society as a whole — mitigating the climate impacts of energy production as oil and gas continue to meet the demand for energy.