Director of Operations and Shareholder Advocacy, Miller/Howard Investments
With oil spills, we see it. We see the oil slicking our oceans and waterways; we see the oil coating wildlife; we see the oil on the soil and sand of our beaches. The images are stark and immediate. As a regulator, investor or company, it is simpler to make the case for action based on what you can see.
What about spills you can’t see?
Methane avoids detection by the human senses of sight and smell: we can’t see it and we can’t smell it. We rely on infrared imaging technologies and malodorous additives to expose it, and on companies to manage and disclose it.
Recent events show how disclosure is important, but not enough. Adequate disclosure undergirds industry-wide best practices, emission reduction targets and industry-binding regulation.
A massive methane leak at Porter Ranch near Los Angeles in Aliso Canyon, California, was first noted on October 23, 2015. The LA Times reported that “[A]t its height, the leak more than doubled the methane emissions of the entire Los Angeles Basin and surpassed what is released by all industrial activity in the state.” Thousands of families have been displaced, schools were relocated and the site was declared a temporary no-fly zone.
With the egregious and worrisome methane leak comes an opportunity to bring increased understanding of methane to companies, investors and regulators.
Invisible and Insidious:
Methane Is A Climate Heavy-Hitter: “[M]ethane’s lifetime in the atmosphere is much shorter than carbon dioxide (CO2), but CH4 is more efficient at trapping radiation than CO2. Pound for pound, the comparative impact of CH4 on climate change is more than 25 times greater than CO2 over a 100-year period.”
The Regulatory Landscape Is Moving Quickly: Grounded in science and a recognition of the non-linear, accelerating and human costs of climate change, countries and non-state actors made commitments at COP21 to take actions to hold the global average temperature to below 2 degrees Celsius above pre-industrial levels. In 2015, the EPA announced new rules to cut methane emissions from the oil and gas sector to 40-45 percent below 2012 levels by 2025. The glaring loophole, however, is that the new regulations do not apply to existing facilities and infrastructure and “roughly 90% of emissions in 2018 are forecast to come from existing sources.”
But Companies Are Stalling: In 2016, the EDF found, “that none of the 65 market leaders reviewed in the production and midstream segments disclose targets to reduce methane emissions and less than a third report such emissions via accessible, investor-facing data sources.”
Investors Are Leading: Shareholder resolutions and dialogues are urging companies to improve disclosure and management of methane emissions, to support the proposed EPA rules, and to share best practices.
We may not see the methane in our sky, but we will see it in the environmental and health consequences, and often also at the reckoning of regulators and litigators. Yet, even if we can’t see it, we can measure and therefore manage it. Shareholders can help make the invisible visible by engaging companies on methane emissions disclosure.