PITTSBURGH (TNS) — Suddenly, certified gas is on every natural gas driller’s lips, the industry’s version of conflict-free gems or fair-trade coffee.

Companies are racing to certify their gas as “responsibly sourced” or “low-emitting,” in an effort to be accepted into the energy transition.

Companies like EQT Corp. and Southwestern Energy Corp. were hoping certifying some of their wells would set them apart from competitors, especially as their clients, utilities in the U.S. and abroad, try to negotiate their place in more climate-conscious economies. Instead, the idea of certified gas has caught on so quickly that the industry predicts it will go from differentiator to status quo in short order.

With still one foot in the pilot phase, many oil and gas companies have had some of their production certified by one group or another to testify to how little their wells leak methane, or how responsibly they handle their waste, or how robust is their outreach is to local communities.

Michael Kennedy, CFO for Antero Resources, a Colorado-based driller that announced earlier this month that an undisclosed number of its wells in Appalachia were certified by Project Canary, said certified gas is the new “license to operate.”

In a bullish analysis of the trend, the global consultancy Wood Mackenzie predicted that certifying gas, especially in the Marcellus and Haynesville shale gas plays, could lead to “better pricing and position for U.S. LNG (liquefied natural gas) as green LNG, making it more globally competitive.”

As sanctions against Russia increasingly imperil Europe’s reliance on Russian gas, U.S. gas producers are eager to ink agreements with European utilities, which require some demonstration that importing these fossil fuels doesn’t sacrifice their climate commitments.

Operators of liquefied natural gas terminals, where gas is turned into a liquid for shipping, have seized on this trend.

Cheniere Energy, a Texas based firm that operates LNG facilities on the Gulf Coast, is developing “carbon emission tags” for its LNG cargoes this year.

It will calculate those tags according to its own “proprietary lifecycle analysis model,” the company said in a statement announcing its intentions last year.

What’s

the criteria?

Some skeptics of certified gas, and even some of its proponents, lament there is no one set of criteria to define what responsible production means.

There are at least four certification schemes used in the industry in the U.S., but it’s still the producers and the buyers who call the shots on what matters to them.

Colorado-based company Project Canary is one of the leading certifiers in the U.S. It began as a methane monitoring effort and, in 2020, merged with a firm that developed the TrustWell certification. Now, Project Canary said it has 600 data points that determine its certification, including how much methane is lost to the atmosphere.

So what methane score qualifies as good?

”Each buyer and seller are actually negotiating that number,” the company’s CEO Chris Romer said earlier this month. “It’s like an early market where nobody knows where the buyers and sellers (end up).”

”We don’t think Canary’s job is going to be to tell utilities and operators what the standard is,” he added, although the company’s highest certification attests that no more than 0.28% of gas leaks out.

The TrustWell certification has two buckets: local factors — for example, if the well is located in a populated area — and control factors — how the company handles methane emissions, water withdrawals, etc.

How much each variable is worth is unique to the particular well.

As an example, frack trucks traveling to a remote location with no residents around will have a lower emphasis placed on their performance than those driving through suburban streets.

”It’s the same thing with methane,” said Will Foiles, Project Canary’s chief operating officer. If the well is in an area with already compromised air quality, the impact from emissions would be weighted more heavily.

In drought areas, water withdrawals are more important.

For methane emissions, which are a chief concern for many utilities with greenhouse gas reduction goals, companies and customers negotiate their own metrics and Project Canary certifies that those metrics are met.

”This is exactly the business we’re in,” Mr. Romer said. “We’re not the arbiter.”

But an arbiter will materialize one way or another, he predicted.

Before FERC

In the U.S., the issue of certification standards is being debated before the Federal Energy Regulatory Commission. In December, Tennessee Gas Pipeline, a 11,760-mile pipeline network that carries gas between New England, Appalachia and the Gulf Coast, asked for the right to aggregate and sell certified gas at certain pooling points on its system. The pipeline argued that this would be the first liquid market for certified gas and that it would accelerate the development of such gas to the benefit of customers and the environment.

Certified gas, in this context, would be gas that fetches a “gold” or “platinum” rating from Project Canary or a letter grade of C or higher from MiQ, a nonprofit methane-focused certificate registry.

Marcellus producers including Southwestern Energy Corp., EQT Corp., and Antero wrote in favor of the proposal.

Bigger fish, including Chevron and Shell, asked regulators to pump the brakes, arguing that allowing a piecemeal approach to certified gas — one without a single, unified standard — would actually fracture the market for it.

Tennessee Gas Pipeline said it wants the market to decide what responsible gas means.

Investor guidance

The current certifications are tied to assets, not companies. There is no such thing as a certified operator, although Georges Tijbosch, CEO of MiQ said at a webinar earlier this month that large investors like pension funds are asking for just that: “When we can look at companies?”

”My answer is the when a company certifies all of its wells,” he said.

That’s what Sewickley-based Penn Energy Resources has done. Earlier this year, the driller, which operates north of Pittsburgh, had Project Canary certify all of its wells.

”We went all in,” CEO Rich Weber said.

Weber wondered at first if the label is necessary, if anyone would care. Ultimately, the company decided it could be used to vouch for the company’s environmental and social practices to stakeholders ranging from local governments to landowners to utilities buying the gas. Less than a week after PennEnergy announced the certification, its general counsel invoked it in a debate over Economy Borough’s oil and gas ordinance.

”I liken it to a bond rating,” Weber said. “When you’re an investor in a company, you look at S&P and Moody’s.”

Just like investment-grade bonds see better rates, certified gas is now fetching a small premium, although industry players suspect that will fizzle as certified gas because the default.

”I think the vast majority of gas sold in the U.S. in the next year is going to qualify as RSG,” he said.

Once the trend is firmly established, governments might feel freer regulating things like methane, Mr. Tijbosch said during the webinar.

MiQ puts itself in the middle of a Venn diagram between voluntary action and regulation.

”We create the market now. We create the precedent. We create the case study so that it can be studied and eventually adopted into legislation,” Mr. Tijbosch said.