Natural gas development has been publicized for its superior environmental profile; fugitive methane emissions in the oil and gas sector represent one of the most rapidly growing sources of anthropogenic methane emissions in the US, contributing 20 percent of short-term global warming impact.The promise of natural gas as a bridge fuel to a more sustainable energy future is under question given the high short-term climate impact of methane emissions. The Intergovernmental Panel on Climate Change estimates that methane has 25x the impact on temperature as CO2 over a 100 year period and 72x the impact over a 20 year period.
Methane is the primary component of natural gas and is emitted across the value chain during production, processing, transmission, storage, and distribution. Emissions have not been tightly regulated, measured, monitored, mitigated, or disclosed, creating a risk to industry, operators, and environment alike. Studies from Cornell and the University of Colorado estimate highly varied methane leakage rates as a percentage of production, creating uncertainty and garnering attention from Forbes and The New York Times. Regulatory risk exists as the EPA looks to limit emissions through rules such as The New Source Performance Standards requiring green completions by 2015, and encourages best practice through the Natural Gas STAR program. The International Energy Agency highlights the risk of failing to implement best practice measurement and disclosure in their 2012 report “The Golden Age of Natural Gas.”
We believe Range Resources’ social license to operate is at risk and the company has a responsibility to implement a program of measurement, mitigation, disclosure, and target setting. We recognize some operations may incorporate best practice management; however, the risk of leaks at high growth or select geographies can negate best practices elsewhere.
Methane leakage has a direct economic impact on Range Resources as lost gas is not available for sale, whereas natural gas captured through control processes can be sold in the market, generating positive returns.
Range Resources has an opportunity to display leadership, as the company has in prior environmental disclosures. Significant reductions in methane emissions are possible using new technologies with positive return on investment. Benefits include worker safety improvements, maximizing available energy resources, reducing economic waste, protecting human health, and reducing environmental impacts. Upgrading production assets may also improve performance, making assets more robust and less susceptible to upsets and downtime.
Shareholders request that the Board of Directors publish a report (by October 2013, at reasonable cost, and omitting proprietary information) for investors on how Range Resources is measuring, mitigating, setting reduction targets, and disclosing methane emissions.
The Carbon Disclosure Project’s 2013 Oil and Gas Supplement will include a questionnaire on methane emissions, presenting widely accepted format for disclosure. We believe a report adequate for investors to assess the company’s strategy would include methane leakage rate as a percentage of production or throughput, how the company is measuring and mitigating emissions, reduction targets, best practices, worst performing assets, risk mitigation, and environmental impact.