Methane has long been recognized as a potent greenhouse gas, but preventing its escape from industrial facilities has only recently become a prominent goal. The oil and gas industry, for example, is a large emitter, and research (including some by scientists at the Environmental Defense Fund) has documented that far more methane seeps out of wells, pipelines, valves and other points in the supply chain than energy companies and official emissions inventories report.
This revelation has people worried—people like me, who are concerned about the health and future of humanity. And people like the CEOs of global oil and gas companies, including BP and ExxonMobil, who have voluntarily pledged to reduce methane emissions. Increasingly, investors, public officials and neighbors living near oil and gas infrastructure have become worried, too.
At the same time entrepreneurs are growing excited, because one person’s challenge is an innovator’s opportunity. Quietly, companies have been developing new technologies that make detecting methane leaks more efficient, reliable and affordable. For example, internet-connected lasers that shine along well pad tanks can detect invisible methane emissions and warn operators miles away. New technology can reduce waste, satisfy investors and even increase employee safety by reducing the time they spend driving to sites to check for leaks in person—one of the most dangerous parts of their day.
Countries around the world are beginning to tackle the challenge head-on. Many, including the U.S., Canada and Mexico, have adopted national regulations to cut methane emissions.
All of this momentum is positive. But a big impediment remains: Over the last year the EDF worked with a group of state environmental agencies and other stakeholders to identify issues that might be stifling development and deployment of improved emissions detection and reduction technology. One point rose to the top—the lack of transparent, rapid and consistent regulatory approval of new technology.
For innovation to solve environmental problems, entrepreneurs need a clear signal their inventions will have a market. Investors want to know how long it will take to realize a profit. Written with innovators in mind, regulations can do much more than mandate a cleaner environment. They can spur competitive markets. But to do so, regulators must reward innovation and risk. Methane regulations currently do not.
Consider three regulatory challenges and solutions:
The first issue is equivalence—the idea an energy company can use a different practice or technology than a current one, so long as it produces the mandated “equivalent reductions” of methane. Most stakeholders—from environmentalists to energy executives—would agree that if someone invents a better or cheaper way to hit a methane target, that innovation should be allowed and encouraged. For example, EDF and Stanford University tested truck, drone and plane-mounted systems that quickly scan for methane emissions across large areas of land. But methane rules as written prescribe steps for monitoring, instead of outcomes—like a percentage of emission reductions, tons of emissions avoided or other numerical targets an engineer would know how to tackle. Without a manageable numerical target or way to calculate impact, it would be difficult for a company to justify the switch to innovative technologies.
The market could get the kind of clarity on equivalence it needs if a standard model were adopted that allows an objective comparison between approved processes (for example, calendar-based inspections) and new methods like ground-based lasers and fast-flying drones.
The second challenge is how regulation affects the speed of innovation. Tech companies are used to receiving rapid feedback about their products and continually improving them. The operating conditions at oil and gas sites change rapidly, and there are huge variations in the demands placed on equipment by weather—from winter in North Dakota to summer in Texas. Innovators need to demonstrate their technology in real-world conditions to gain the confidence of operators and service providers. And developing these solutions is expensive and complicated. We reviewed methane rules from the U.S. Environmental Protection Agency as well as six states and found only the EPA and Colorado had a pathway for approving alternative technology. In both cases, however, the process could stretch out for a year or more. Innovators want to be in the field learning, improving and recouping their investment far faster than that.
Regulations can encourage innovation by prescribing quick and transparent processes that get new detection technologies out in the field fast.
Finally, the number of states, countries and companies developing methane-reduction strategies is hard to nail down. But it’s big and growing. Currently, an innovator might face a year or more for approval in Colorado, then start from scratch for approval for the same technology with the same operator at the same kind of wells in the same weather conditions just over the state line in Wyoming.
It is hard to imagine a start-up firm, or even a large corporation, investing in this fragmented market. It would be much easier for them to rise to the challenge if states, provinces and countries agreed to a shared model, including a standard set of definitions and assumptions regarding how methane innovations will be evaluated. That would turn a local or regional market opportunity into a global one.
Designed well, regulations can reduce emissions faster by providing entrepreneurs confidence there will be new markets. If governments get the rules right, they can spark a new wave of innovation.