Green vs Clean


Sep 26, 2023

The Inflation Reduction Act – Big Funding for Big Reductions

The U.S Inflation Reduction Act (IRA) provides incentives and penalties intended to motivate the industry to mitigate greenhouse gas emissions, to explore innovative carbon-reduction options, and to measure and report on emissions. It also incentivizes clean energy generation and storage research and production through tax code provisions and funding.

Globally, agriculture is the largest source of human-produced methane emissions, followed by oil and gas operations emissions, estimated at about one-quarter to one-third of human global methane emissions.

The IRA provides $1 billion in funding to boost greenhouse gas measurement and abatement technologies and imposes escalating fees for methane emissions over 25,000 metric tons of CO2e per year, beginning with $900/metric ton in 2024 and increasing to $1,500/metric ton in 2026. Technology to monitor and measure methane from production sites and operations has evolved and can be deployed to provide more accurate data on actual emissions in real time, leading to better models and analyses.

Oil and Gas – A Critical Asset

Producing and transporting oil and gas is a complex, infrastructure-intensive effort, and emissions from equipment and operations are difficult both to find and to measure accurately. However, it is critical for producers to identify and reduce these Scope 1 and 2 greenhouse gas emissions, primarily from upstream (onshore and offshore) operations. Globally, eliminating waste emissions can abate roughly 5 gigatons of CO2-equivalent—equal to 60% of the world’s transportation emissions.

In the U.S., it is estimated that oil and gas operations account for just over one-half of national methane emissions. Primary sources of these emissions are venting, flaring, transmission and storage equipment leaks, and abandoned wells. The U.S. methane emission amounts are about one-tenth of the global oil and gas emissions.

Cutting these emissions in oil and gas operations provide rapid, high impact reductions in atmospheric methane accumulation. Reducing methane emissions by cutting venting and flaring, repairing and upgrading equipment, and detecting and repairing leaks (from transmission lines, storage facilities, and abandoned wells) can help producers meet corporate, national, and global ESG objectives. Capturing the natural gas that is now vented, flared, or lost as fugitive emissions from leaks can contribute to sales revenue while mitigating potential climate warming.

Other Options – CCUS, Electrification, and Hydrogen

The IRA offers incentives for carbon sequestration, but the technology and associated infrastructure is still a work in progress. Industrial CCUS (carbon capture, utilization, and storage) technologies, while in use by the energy sector, are still experimental and projects will need additional investment to scale rapidly and succeed. The IRA also provides financial incentives for electrification of upstream production equipment and for low-emission hydrogen production, as well as biofuels production. Cutting these emissions operations provide rapid, high impact reductions in atmospheric methane accumulation.

Navigating the maze of local, state, regional, and federal energy regulations is complicated, and the IRA adds layers of operations analysis and resource evaluations. Ultimately, producers that pursue lower carbon intensity by reducing methane emissions will benefit financially.

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