Part 2 – Are Your Facilities ESG Ready?
In August 2022, the Environmental Protection Agency announced that it would conduct a series of helicopter flyovers of the Permian Basin in search of super emitters. As the oil & gas industry comes to terms with the new reality of escalating decarbonization, unstoppable ESG policies, and methane emission fees, teams should look higher than the occasional low flying EPA chopper.
Beginning this fall, data from MethaneAIR will become publicly available at no cost, a joint venture between the Environmental Defense Fund, Harvard, and the Smithsonian that will continuously patrol North American airspace at 40,000 ft. with a specially outfitted Learjet hunting for emissions. Look even higher in the first half of 2024 as Methane Air’s sister project MethaneSAT launches into orbit. Both platforms will deliver high resolution emissions data for large swaths of the country down to the smallest sources of emissions. Amidst a year of record global heatwaves, forest fires, and bizarre atmospheric river events, the decarbonization message has been driven home with an exclamation point!
To be fair, the energy industry has always had a focus on the environment, only before 2020 it was just called HSE (health, safety, environment) compared to the heavy emphasis on ESG today. ESG still doesn’t seem like the right term to use. After all, we’re really just talking about the “E” in ESG (environmental), conflating social and governance with emissions reduction. Perhaps a better term is Triple Bottom Line (TBL), which is an accounting framework for measuring corporate performance on multiple dimensions: people, financial, and environmental. This recognizes that business “success” is not merely centered around profit margins but also takes into account carbon footprint and other environmental key performance indicators. TBL is more prevalent in other segments of the energy industry where the energy transition and net zero are just as important (see PG&E’s TBL strategy for example).
While most of the supermajors have well delineated ESG and climate solution strategies, for many in our industry the new standards and reporting requirements are not something teams are prepared for. Some have formed internal ESG task forces and sustainability committees, but the skillsets are new, and the regulatory landscape is increasingly overwhelming.
With the intense scrutiny being applied to sources of oilfield emissions, operators and midstream companies must accurately self-report and establish their emissions baseline to get ahead of regulatory penalties. A necessity that is given even more urgency with the Inflation Reduction Act’s methane fee set to start in 2024. But given the vast array of potential emission points at a production facility, teams need to know exactly what assets are included in evolving regulations. Highly specialized facilities knowledge is needed but also bandwidth to document every wellsite for ESG reporting. However, many sustainability efforts lack the manpower and expertise required to know what is onsite, how complex, interconnected components work, and where trouble spots can occur.
To succeed teams need to either build or fund costly esg groups, however this is not a core competency for most oil & gas teams today. Or partner with experts who understand the new ESG requirements.
In response to the EPA’s Permian flyovers last year, Stonebridge announced a new program called TiteSite, which is the culmination of decades of wellsite and production facilities experience, including field operations, site design, asset specifications, and engineering. In essence, TiteSite packages this extensive knowledge into a business accelerator to jump start sustainability and set energy companies on a path toward quickly understanding emissions liability and meeting regulations.
The TiteSite program offers upstream companies a complete and thorough physical asset inventory audit of all wellsite and production facilities equipment, pneumatic devices, components, and materials. Audits include photos of each site asset, manufacturer plate information, and identification of devices and components capable of causing emissions. Armed with this detailed report, teams can rapidly identify any ESG liability, take corrective action, and bolster their ESG profile.
In addition to regulatory, asset buyers expect ESG to be part of the deal (the topic of the first post in this series), so showing a potential buyer that your assets are ESG accretive is a strong secondary benefit of TiteSite.
As a third benefit, the TiteSite report also includes fair market value for assets as ascribed by the COPAS (Council of Petroleum Accountants Societies). This data can be used for more accurate depreciation in an operator’s fixed asset accounting. TiteSite data can also be used to plan SCADA automation initiatives or combined with other data sources to power predictive analytics and optimize site performance.
In the next and final blog in this series on untangling ESG complexity, we’ll take a look at digital trends across the industry arising in response to decarbonization policy.