New York utility regulator approves a first-of-its-kind certified gas pilot program. Now what?

Con Edison East River Generation Station

The New York Public Service Commission recently approved a certified natural gas pilot program proposed by Con Edison, the gas and electric utility for much of New York City. Under the pilot, Con Edison may pay a premium for limited amounts of natural gas that is purportedly certified as having lower methane emissions than the gas Con Ed typically purchases to serve its customers. Methane, the principal component of natural gas, is a potent greenhouse gas that contributes to climate change. Research shows that a rapid, full-scale effort to reduce methane emissions — including from the oil and gas industry — could slow the current rate of warming by as much as 30%.

There are several reasons to be skeptical about whether this scheme delivers real environmental benefits and if it is worth the premium price Con Ed will pay, and ultimately pass along to customers. This pilot program should make good progress in answering these questions.

What is differentiated gas and why is industry so focused on it?

In some respects, differentiated natural gas, which is purported to be more environmentally friendly than other gas, is not new. Some oil and gas companies and utilities have been talking about “green gas” or “responsibly sourced gas” for years as regulators and the public have focused on methane pollution from industry. A newer, rapidly growing industry practice is “certifying” natural gas as having lower methane emissions or other desirable attributes.

Enverus Intelligence estimated that producer-certified gas would make up nearly a fifth of the North American natural gas market by the end of 2022. MiQ, one of the leading certification entities, states that it currently certifies 4% of global gas supply. Domestic and international purchasers, concerned about the impacts of climate change, appear to be willing to pay more for low-emission gas — one estimate puts this premium at 3-5 cents /MMBtu. Kinder Morgan launched a certified gas pooling service for shippers in 2022 — though its first annual report indicated that it received no bids for the service. The state of California recently considered, and wisely rejected, legislation that would have required the state to purchase only certified gas, without setting any meaningful standards for certification.

But without a standard definition for certified gas, certifying entities assess different aspects of performance — methane emissions, water protections, community protections, etc. — at drastically different levels of operation and with little or no transparency into their technologies and methods.

Why certified gas may not be a solution

EDF has worked on the problem of oil and gas methane pollution for over a decade, and our experience tells us that claims of reduced methane intensity must be viewed with healthy skepticism. Industry progress in reducing the methane pollution associated with natural gas production, transportation and use is checkered at best. Few companies currently do the kind of robust measurement-based accurate monitoring and reporting necessary to sustain a claim that the gas they produce is fundamentally cleaner than the industry average, and none we’re aware of do so with the kind of transparency required to enable independent verification that the so called certified gas is really worth the premium price.

EDF recognizes the value of industry efforts to reduce the methane footprint of the gas it produces. And we are supportive of efforts to create price signals in global gas markets for products that can be empirically demonstrated to pack less of a climate punch than non-differentiated gas. But without robust, uniform standards for transparency, measurement, reporting and verification, gas certification can become just an exercise in greenwashing.

EDF has identified primary concerns with gas “certification” programs:

• Lack of transparency.  With no uniform and mandatory standards for certification, it is critical that those seeking to differentiate their natural gas based on methane intensity provide complete transparency around their criteria and methodologies. While some certifying entities have endeavored to open their books, others have not.
• Lack of robust measurement, reporting and verification standards. Without strong and uniform standards on the measurement and verification of emissions from any particular supply chain, it is impossible to reach reliable conclusions about the climate impact of purportedly differentiated natural gas. This creates ample opportunity for customer confusion or misinformation.
• The potential for firms to cherry-pick which sites to certify within their portfolio. Companies can choose to seek certification of better performing facilities while leaving older, leakier facilities outside of the analysis. Thus, certification doesn’t accurately depict the practices or overall emissions of the operator.
• Limited coverage across firms. Voluntary certifications lack sufficient coverage of industry that is needed to achieve meaningful emissions reductions at the national or global scale.

Third-party certification is no substitute for comprehensive nationwide standards to reduce industry methane emissions — particularly because federal requirements can apply to all oil and gas facilities, not just those cherry-picked for voluntary certification programs. Finally, differentiated gas products cannot distract from the urgent imperative to reduce overall reliance on methane natural gas to mitigate the climate crisis.

Con Edison’s pilot should ensure accountability and send a market signal

The recently-approved pilot program requires detailed annual reporting that will provide valuable information to help the public, the NY Public Service Commission and Con Edison evaluate the efficacy of differentiated gas products to reduce methane emissions from the oil and gas supply chain. EDF is proud of our work to insist these reporting requirements be included as a condition of approving this pilot. The final version of the pilot includes guardrails and accountability measures, as proposed in EDF’s expert testimony. These additions could help signal to the market that purchasers want to see purported “certifications” backed up by implementation and publicly available data.

In approving the proposal, the Commission concluded that the value of certified gas is uncertain and a pilot program is appropriate to determine if certified gas “can be used to reduce GHG emissions during the transition period to a decarbonized gas system.”

Meanwhile, in a separate proceeding regarding implementation of the Climate Leadership and Community Protection Act, New York utilities have proposed that methane intensities claimed by third-party certifiers should be incorporated into annual GHG emissions reporting to evaluate utility compliance with the state climate law. This proposal is inappropriate and inconsistent with the Commission’s finding that further evaluation of certified gas products is needed to determine whether third-party certification is even reducing emissions. As EDF stated in recent comments, the Commission must not incorporate unverified and questionable GHG emissions data into reporting frameworks.

The New York Public Service Commission and utility regulators around the country must be vigilant to protect customers from costly projects that do not yield genuine reductions in greenhouse gas emissions.