The Common Ground of Emissions Reduction

Mark Green
Posted March 5, 2021

We don’t yet know the full extent of the Biden administration’s strategy for U.S. energy. As API President and CEO Mike Sommers has said repeatedly since the election, our industry is ready to work with the administration for a better economy, cleaner environment and progress toward climate goals. Based on remarks by former Secretary of State John Kerry at the CERAWeek conference, there’s important common ground for a cooperative relationship.

During the virtual conference this week, the president’s special envoy for climate said:

“I don’t object per se to fossil fuel. I object to the byproduct of fossil fuel, which is the carbon. That’s the problem, and the methane, that's another major problem emerging. So, we have to be able to abate. It’s the debate between unabated and abated production.”

Common ground: The natural gas and oil industry also is for abating carbon emissions – and has been working to reduce carbon and capture methane, through innovation and technology, for some time.

Industry investment, innovation and problem-solving on emissions came up so often during CERAWeek, it was hard to track them all. If, as Kerry said, the administration sees carbon and methane emissions as the targets – and not the energy from natural gas and oil – industry not only is a willing partner, it’s one that’s tackling those challenges head on.

Below, a sampling of what industry leaders said this week about reducing emissions and natural gas and oil’s role in the U.S. energy picture.

Michael Wirth, Chevron board chairman and CEO:

“I think it's incumbent upon all of us to be sure that we've done everything we can to reduce or eliminate methane emissions, and I think the technologies exist to do so – the incentives exist to do so. … The industry is making a lot of the right moves we need in the United States to be sure we're working with the new administration in order to help them understand that, to see what we're doing and see the benefit of the voluntary actions that are being taken already. … There are incentives for all of us to keep methane out of the air, to keep it in the pipes and keep it used for the purposes it is intended for, so it's a productive part of a cleaner energy future.”

ExxonMobil Chairman and CEO Darren Woods talked about the dual challenge of meeting the world’s energy needs while also addressing emissions and the risks associated with climate change. Woods said ExxonMobil has invested about $10 billion in total and emissions reduction technology and has plans to invest another $3 billion through 2025. Woods:

“I think the work that we've been doing is focused on technologies that address the emissions associated with the use of [natural gas and oil]. Recognizing the difficulty of replacing them, let's focus on what the issue is, which is the emissions. … We have been doing research for over a decade on carbon capture and storage to try to make that more economic, more effective, to allow us to capture the emissions that are generated in power generation and/or industrial applications. We feel pretty good about the progress we've been making in that space.”

Woods said natural gas and oil play significant roles in the everyday economy and people’s lives and will be part of the future energy mix:

“It supports economic growth and people rising in prosperity, and if you think about where gas is used in particular, it's in the industrial applications, which grow with the economy, it's in power generation, [which grows] with the economy. As people's lifestyles improve and they have access to better standards of living, their use of electricity grows. … Where gas flows and the support that it gives the economy, makes it such a fundamental value proposition for society, that as we go forward in the future, it's going to continue to be needed.”

Vicki Hollub, Occidental president and CEO:

“We should not be talking about eliminating fossil fuels. What we really need to be talking about is eliminating emissions, and if we can provide – and we will – net-carbon-zero oil, that is what the world needs, and the world cannot achieve the goals … of the Paris Accord without the oil industry helping with that.”

Carbon capture, utilization and storage – mentioned by these and other CERAWeek speakers – is important for our industry and others across the economy. Other technologies were mentioned as well – including turning dairy farm waste into useful, transportable fuel that helps tackle methane emissions and the need for energy at the same time – the very definition of addressing the dual challenge. Certainly, capturing methane is an industry focus through initiatives like The Environmental Partnership.

In industry’s Midstream sector, as pointed out by Enbridge Senior Vice President and COO Michele Harradence, a number of measures have been taken to reduce emissions, including modernizing and upgrading older equipment, accelerating leak detection and repairing and enhancing efficiency. Harradence:

“Natural gas … has already done a lot to reduce greenhouse gas emissions here in North America. It’s an excellent complement to renewable energy, and it provides low-cost reliable backup needed to support the group growth of renewable infrastructure. … We need to make sure that public policy is technology- and fuel source-agnostic, and we really need to make sure we're not limiting the innovations space.”

John Hess, CEO of Hess Corporation, noted that the International Energy Agency (IEA) projected in December that the world needs to invest $500 billion to $600 billion a year to grow global natural gas and oil production to keep up with demand growth. At the same time, he said, industry must satisfy shareholders and stakeholders, which is where climate and environmental, social and governance (ESG) issues come into play. Hess:

“[ESG] is the license to operate, and I think the real issue here is climate change and how do you think about climate change, and it's probably the crosshairs where shareholder primacy and stakeholder primacy come together. … When you think about climate change, you have to engage your shareholders and have a discussion about it. It's real, it's the greatest scientific challenge of the 21st century. But there are two major challenges that we face: How do you grow energy 20% the next 20 years and how do you get to net zero carbon emissions by 2050? … It is about education when you talk to investors. It's trying to get some common ground of understanding. … What's very, very clear is the energy transition is going to take a long time ... and it's going to need new technologies that don't even exist today.”

It will be interesting to see where this conversation goes next. The United States traveled a long road to become the world’s leading producer of natural gas and oil – energy sources the IEA says will provide nearly half the world’s energy in 2040.

Yet, the dual challenge Wood described – meeting energy demand and addressing emissions and climate concerns – clearly has been on industry’s radar, and significant progress has been made. Thanks to the U.S. energy revolution, the increased use of domestic natural gas has contributed to a decline in power-generation carbon dioxide emissions, which in 2020 are estimated to have fallen more than 40% since peaking in 2007. The U.S. leads the world in carbon dioxide emissions reductions since 2000.

On methane, emissions per unit of production from key basins fell nearly 70% between 2011 and 2019 (see EPA data here and U.S. Energy Information Administration data here). In addition, API in January said it supports direct regulation of methane emissions from new and existing sources and would work with the administration to develop a regulatory regime.

Industry is on task and welcomes the potential for real conversations about actions that will bring about meaningful emissions reductions, even as we continue to provide Americans with affordable, reliable energy for their daily lives.