Better Ways to Stop Natural Gas Pipeline Leaks

Carbon dioxide has received the bulk of policymakers’ attention as the villain of climate change. Now, its henchman methane is facing scrutiny. Methane is an attractive target. It is much nastier than carbon dioxide in the atmosphere. Over one hundred years, a kilogram of methane has a 28-times greater impact on global warming than a single kilogram of carbon dioxide.

Unfortunately, designing practical policies to cut methane emissions is tough. Unlike carbon dioxide, which can be pinned on burning fossil fuels in power plants and vehicles, methane comes from millions of diverse sources. Methane comes from enteric fermentation (the technical term for cow burps), manure (cows again), landfills, and water treatment plants.

Nonetheless, the Environmental Protection Agency (EPA) is going ahead with regulations and has announced plans to go after the largest source of methane emissions—the oil and gas industry. In 2013, methane leaking from natural gas systems was about 2.8% of total energy-related greenhouse gas emissions. The prevalence of leaks may mean that natural gas generation is worse than coal-powered generation for climate change. Meredith explored this in a prior blog.

To me it’s a big puzzle why there’s any methane leaking. Why is the oil and gas industry allowing one of its major products, natural gas, to float away into the atmosphere?

One explanation is that oil and gas producers are plugging some leaks, but not all because plugging all leaks is expensive.  At some point, for private industry, the cost of repairs is not cost justified. The cost exceeds the market value of the gas saved. Policy could reduce leaks further by making the producers face the full social cost of the leaks, including the climate change impacts.

However, the part of the natural gas system that most worries me is the transportation network.

For the most part, the owners and operators of the transportation networks don’t lose money when gas leaks from their infrastructure, and they don’t benefit when they stop leaks. If the amount of gas delivered by a pipeline is less than the gas entering the pipeline, then the shipper, in the case of interstate pipelines, or the end-use customer, in the case of local distribution companies picks up the tab.

This occurs due to cost pass-through mechanisms. The rates charged by pipelines and distribution companies explicitly assume that some gas will be lost. If leaks increase or decrease, rates are adjusted so that shippers or customers continue to bear the cost.

This is a common arrangement in the world of utility regulation. Retail electric and gas utilities have fuel adjustment clauses that pass through changing fuel costs and decoupling mechanisms that pass through capital costs.

Recognizing that these incentive problems may be causing underinvestment in fixing the leaks, federal and state utility regulators are getting involved.

The Federal Energy Regulatory Commission (FERC), which sets rates for the country’s interstate natural gas pipelines, launched a new docket last November. FERC proposes to allow pipelines to recover capital expenditures made to enhance reliability, improve safety and meet environmental objectives. This would be allowed outside of the normal rate-setting process.

In January and February FERC heard from interested parties. The pipeline owners love the idea of being able to collect the cost of repairs from customers. What utility wouldn’t? The environmental groups want leaks reduced, but fret that the utilities will favor expensive capital fixes over low-cost operational solutions. The shippers are not happy at all. They doubt the investments will be cost-effective and fear pipelines will spend money with abandon.

There’s no obvious solution. The principal-agent problem persists with or without FERC’s proposed policy. A pipeline’s interests don’t align with its shippers’.

What I find most jarring, however, is the lack of good empirical leak data. Regulators are developing policy in a data vacuum.

Turns out that the EPA depends on a 1996 study that is based on a very small number of leak measurements. Using the study, the EPA calculates “per mile” emissions factors for cast iron pipes, unprotected steel pipes, plastic pipes, etc. Then the EPA estimates total US emissions by multiplying the factors by the miles of each pipe type in service across the country. This recent report from the EPA’s Office of Inspector General provides a critique of the EPA’s emissions factors.

A cast iron pipe that leaked.

A cast iron pipe that leaked  (http://opsweb.phmsa.dot.gov/pipeline_replacement/)

The 1996 study may have been the best available in the past, but times have changed.

The rapidly falling cost of communicating sensors and cloud computing is enabling real-time measurement that was cost prohibitive in the past. This trend is called the “Internet of Things” or Industry 4.0, in the industrial context. Now it’s feasible to monitor natural gas pipelines and compressors at many locations on a real-time basis.

The value of lost gas is substantial. The DOE estimates that each year 110 Bcf per is lost from transmission infrastructure alone. That equates to over $300 million per year at current natural gas futures prices. Applying a social cost of carbon of $37 per metric ton of carbon dioxide, the cost exceeds $2 billion. Investments in sensors are easy to justify with so much value at stake.

The Environmental Defense Fund and Google have launched an initiative that demonstrates one new approach to leak monitoring. In city after city they are conducting drive-by leak surveys using car-mounted measurement devices. Street View meets leak detection. In the sample maps below, each circle signifies a leak, with darker colors representing bigger leaks. The incidence of leaks varies significantly between and within cities.

Here at the Energy Institute we will soon be initiating a new project that will take advantage of new monitoring technologies in the industrial sector, to find energy saving opportunities.

Better leak detection could enable entirely new policy options. The EPA could even pursue market-based approaches that charge utilities directly for the social cost of the leaked methane.

It’s time for natural gas utilities and their regulators to join the sensor revolution. Improving measurement of natural gas leaks is a great place for federal and state regulators to start.

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10 Responses to Better Ways to Stop Natural Gas Pipeline Leaks

  1. Steven Rudnick says:

    This article starts with an egregious error. I stopped reading after the first paragraph. Methane does have about twenty-eight times the heat trapping capacity of CO2 but its lifetime is much shorter so the 100 year statement is quite wrong.

    • Gabriel Taylor says:

      It is not an error, it looks like it is based on the Intergovernmental Panel on Climate Change (IPCC) Fifth Assessment (https://www.ipcc.ch/report/ar5/wg1/), Chapter 8, Table 8.7 (page 714). IPCC lists the Global Warming Potential for methane as 84 times CO2 on a 20 year basis, and reduced to 28 times CO2 on a 100 year basis due to the short lifetime of methane. Both numbers are higher if you account for climate carbon feedback, but the number used here appears to be conservative.

    • Garret Whitney says:

      It’s much worse it the short term, when most of the climate change tipping points will be reached, and we’ll be committed to living in a completely unlivable world. Way worse. Over a 20-year timespan methane is 72% or more worse than CO2.
      So this argument is dangerous nonsense.

  2. Colin Murphy says:

    This is not an error, the heat trapping effect (radiative forcing) of methane is significantly greater than 28 times that of carbon dioxide, but it has a comparatively short half-life. When you compute the total heat trapped over 100 years, it ends up at 28 times that of an equivalent mass of carbon. If you use a shorter timeframe than 100 years (which may be more appropriate) you get an even greater total effect from methane.

  3. art2science says:

    This is important! That map of Boston is amazing – aging infrastructure made visible.

    This is why most energy-related policy should not be done purely by economists. The engineering issues can be first order, and using engineering ideas creates a bigger solution space, over which the economists can then look at incentives/regulation. Your post is a great example. Good luck with your project.

  4. Ars Technica had good piece on this issue last year. Regarding the question, “Why don’t companies reduce leakage if it is cost effective?” they quoted Mark Boling of Southwestern Energy who was asked that question in a Senate hearing. Boling basically said the industry was capital constrained and there was other investments that would make more money.
    http://arstechnica.com/science/2014/02/methane-burned-vs-methane-leaked-frackings-impact-on-climate-change/2/

  5. Paul Wright says:

    Hi Andy, The URL below shows a gas-line testbed at Berkeley. We built it following the San Bruno tragedy. A video is there. A series of IoT publications is in progress and this first one might be of interest to you (S.D. Nguyen, I. Paprotny, P. Wright, and R. White, “In-plane capacitive MEMS flow sensor for low-cost metering of flow velocity in natural gas pipelines”, 27th IEEE International Conference on Micro Electro Mechanical Systems (MEMS 2014) – San Francisco, USA, Jan 25-30, 2014, pp. 971- 974)

  6. Pingback: Revue des blogs mardi 10 mars 2015 | Veille énergie climat

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