Methane escaping from a well being burned off.

by Steve Haner

Methane (CH4) is money. It is also known as natural gas, one of the most efficient fossil fuels we use, and allowing it to leak into the atmosphere when it could be used wastes energy and money.

Methane is also a greenhouse gas (GHG). But the story gets more interesting here, because when CH4 leaks into the atmosphere it mixes with oxygen and begins to break down into carbon dioxide (CO2) and water vapor (H2O), also both greenhouse gases. Burn it in your home furnace and the same byproducts result, carbon dioxide and water (and valuable heat, of course).

Methane is better at absorbing radiation and thus a more potent GHG than CO2, but it also breaks down far faster than the CO2 it eventually becomes. It all becomes CO2, whether captured and burned or released. So it is debatable whether there are huge environmental benefits behind 2022 legislation to encourage Virginia’s gas utilities to capture and sell methane from sources other than traditional gas wells.

The argument that the bill puts useful energy to work is a stronger one. Of course, that argument would not have encouraged all but one Senate Democrat and about fifteen House Democrats to vote aye at some point as the two bills wound through the process. They listened to industry claims that this is green legislation and ignored appeals from environmental groups to oppose it.

The gas industry is under huge pressure from people eager to destroy it. It has lost fight after fight to expand the supply of natural gas flowing into Virginia from nearby drilling fields, and perhaps can replace some of that lost supply by tapping non-well methane now simply escaping into the air  If some of Virginia’s fanatically green Democrats add their support and political cover to the effort, all the better.

The two companion bills will be back before the reconvened session next week because Governor Glenn Youngkin has proposed a series of amendments making two changes. Actually, his amendments reject two changes the gas industry sought in the existing regulatory language and return the original versions. Neither amendment interferes with the underlying purpose.

If the amendments are rejected, the governor then would have the option to veto it. Without the amendments, he should do just that.

One amendment reverses the kind of obtuse change legislative drafters love to try. Here is what the bill sought to change, the italics being the changes:

  1. RewardIncentivize utilities for meeting or exceeding to meet or exceed conservation and energy efficiency goals that may be established pursuant to the Virginia Energy Plan (§ 45.2-1710 et seq.);

Under that wording, a good utility lawyer would try to argue the incentive payment is due whether or not the goals are actually met. If you don’t believe that, spend some time immersed in utility case documents. Youngkin is right that “rewards” should be given “for meeting” the goals.

The industry also sought to insert, as a new test of whether a project or program is cost-efficient, a “Societal Cost Test” tied to the claimed benefits of their various conservation or energy efficiency programs. The “Save the Planet” test. Adding that would just weaken the impact of the other four tests, which are more tied to consumer cost and traditional accounting issues. The governor is again correct in insisting it be removed.

Exactly what projects to capture non-well methane and get it to customers the gas firms have in mind is not clear. In other parts of the world they usually involve large agricultural operations, capturing gas from animal waste or plant waste, dubbed in this bill “biogas,” and “produced through the anaerobic digestion or thermal conversion of organic matter.”

The bill also allows the companies to capture and transport to customers “low-emission natural gas” (which is also low energy content gas) and adds hydrogen into the statute. As it now stands, this bill is woefully inadequate to regulate the transport and sale of hydrogen if and when that day ever comes. That will take a massive new distribution system.

Methane and carbon dioxide are both byproducts of life and its subsequent decay. Rice production is a major methane source. In fact, all natural wetlands produce methane, and the environmentalist demands to protect and expand wetlands have the unintended side effect of making more methane. Even so, it is a tiny component of the vast atmosphere, less than two parts per million, just slightly more prevalent than not existing at all.

Human extraction and transportation of underground methane for fuel also produce leaks which add methane to the atmosphere, but the industry is under pressure worldwide to reduce that. The lost methane is lost revenue, but that apparently is not sufficient incentive to plug the leaks. So, this bill also allows Virginia gas companies to add any “enhanced leak detection and repair costs” to the items customers must pay for.

We pay to plug the leaks or rebuild the leaky systems and the company gets to sell the saved gas?  Whether this really should be a ratepayer cost was another aspect of the bill that was begging for more scrutiny.

Supporters of the bill are correct that the State Corporation Commission will retain authority to reject projects if they are deemed imprudent or unreasonable or will cost consumers too much. Nothing is declared to be automatically “in the public interest.” Supporters were probably also correct that the law as it stood before wouldn’t support this new approach. But the bill has some sweeteners, two of them being denied by the pending governor’s amendments.

Another obvious amendment the governor did not make would have removed language granting the utilities an enhanced profit margin, an extra 100 basis points of profit as the project’s equity cost is recovered. In an earlier exchange on Bacon’s Rebellion, former Virginia Natural Gas President Jim Kibler wrote:

In this case, unlike the (Virginia Clean Economy Act), the General Assembly is asking the gas utilities for help in reducing the methane emissions from other sectors of the economy and to put up with NIMBY. That’s what the incentive is for.

No, the General Assembly didn’t ask anything, these companies wrote these bills and sought patrons. Any third-party source of methane they work with will be voluntary and probably compensated.  The NIMBY fights that always pop up with energy infrastructure these days (especially pipelines) are inevitable and unrelated to the cost of capital. But they asked for the sweetener and got it.

Unrelated to the main purpose of the bill, the drafters went through the existing gas statute and quietly removed some references to the goal of conservation efforts being lower consumer bills or consumer costs. These were replaced with pledges to seek reduction in customer energy use instead. The cost impact of this, as always not asked about by legislators and not in the impact statements, is going in one direction only – up.

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20 responses to “Building Systems to Use Methane Not From Wells”

  1. DJRippert Avatar

    Sounds like Younkin is on top of this. Good for him.

    However, the cited language from the bill illustrates a problem – bills are apparently written by the companies they affect rather than the legislators who patron them. This should be unacceptable to all Virginians. If our part time General Assembly can’t find the time to write their own bill we need change. One option would be a full time General Assembly. Another would be to increase the funding for each General Assembly member’s staff. of course, if companies in Virginia didn’t have the right to make unlimited donations to politicians and if the spending of those donations wasn’t so opaque … maybe the legislators would be less inclined to let companies write he bills that regulate those companies.

    1. Stephen Haner Avatar
      Stephen Haner

      Well, in fairness the original drafts, even these bills, can get worked over pretty hard once they are in the meat grinder. But the original authors and the patron they recruit carry a great deal of weight, and one of my working aphorisms was “He who brings the substitute carries the day.” Those with the biggest stake take the time to write the substitutes.

      Legislative Services is full time and its staff are there to help legislators with bills. I don’t know about now, but in the past there have been folks there I would trust to draft in this code section. But you are of course right that the money is always hanging around the back of the room.

    2. Dick Hall-Sizemore Avatar
      Dick Hall-Sizemore

      It has been the practice for companies and interest groups to draft bills for patrons to introduce at least since I began at the Division of Legislative Services almost 50 years ago. One notorious example is the American Legislative Exchange Council (ALEC) which adopts model legislation for conservatives to introduce in state legislatures.

  2. Dick Hall-Sizemore Avatar
    Dick Hall-Sizemore

    Really good analysis. Thanks. I would have sent the bill back for an amendment to get rid of the word “incentivize” just on principle. As for “Societal Cost Test”, it seems that capturing waste methane would be a prima facie environmental good. But, you have demonstrated that there are ulterior motives at work here.

    One significant source of methane emissions are landfills, which account for about 17.4 percent of the annual methane emissions.

    1. Stephen Haner Avatar
      Stephen Haner

      Yes, and those are places where a capture and use scheme has already worked in many instances. Now a utility can do it and make even more money! With a bill like this, the first question should always be, is it necessary? I think in general this one passes that test. But surgery is in order.

      Okay, so “ALEC” is notorious in your mind. No model legislation coming out of NCSL? The union-related issue groups never draft and circulate bills? NRA or the anti-gun groups? I think it is a common practice across the political spectrum.

      1. LarrytheG Avatar

        and I’d feel better if I knew which legislation had ALEXs fingers on it (and NCSL and others).

    2. Eric the half a troll Avatar
      Eric the half a troll

      Landfill gas would fall under this bill as well.

  3. Stephen Haner Avatar
    Stephen Haner

    Author’s Note: For readers who saw the original, I may be tweaking it a bit. I got a note from one of the industry lobbyists correcting me on a couple of points. The “Societal Cost Test” and other efficiency tests are not to be applied to these infrastructure products but to the energy efficiency programs the companies run. And the sale of gas itself does not include profit for the utility, it is merely a pass through cost (which again may have something to do with the incentive for going after minor leaks.)

    1. LarrytheG Avatar

      Interesting that such folks read BR and send comments
      and I DO give credit to Haner for getting the article more correct. thanks for that.

      That’s the way a lot of these issues are – the average person and even someone who has a working knowledge like Haner may not get it right.

      So those issues are on the other side of the legislative fence where average folks don’t tread or even if they did, would not understand. Legislators too. They probably have to have the issue explained to them by industry experts.

  4. Eric the half a troll Avatar
    Eric the half a troll

    “So it is debatable whether there are huge environmental benefits behind 2022 legislation to encourage Virginia’s gas utilities to capture and sell methane from sources other than traditional gas wells.”

    Not really, biogas is carbon neutral. The carbon in the CH4 comes out of the atmosphere not out of the ground.

    1. Stephen Haner Avatar
      Stephen Haner

      I think you are making my point, it is all a big (and both natural and vital) carbon cycle, so capturing and burning the ag-related methane is close to a zero sum game. Are you assuming that it then displaces and reduces methane from wells? I know that is the goal of many. But from my reading, the vast majority of methane emissions are not related to that — they are natural (and not going anywhere) or related to the agricultural activity needed to feed 8 billion folks. Convincing people not to eat will be a challenge.

      1. Eric the half a troll Avatar
        Eric the half a troll

        You are now conflating methane emissions (losses from fossil fuel production and transmission as well as ag and landfill sources) with carbon emissions. Biogas processes capture methane emissions associated with ag and lfg. If you are talking about carbon emissions when burned, again there is no net carbon added to the atmosphere with biogas, there is with natural gas.

        Either way (actually both ways), biogas comes out ahead.

  5. energyNOW_Fan Avatar

    Generally speaking, legislators US-wide are creating enormous subsidies for what they see as desirable, green energy. For example, California is giving enormous subsidies for advanced bio-diesel made from corn/soy beans etc. That has created tremendous demand for oil seeds, and even oil companies are getting into the act of producing the new diesel. But the only way it works economically is giving big cash to subsidize the concept. Major oil companies are considering carbon capture a possible $4-Trillion dollar business. Of course, someone will have to pay for it, and that is what the carbon neutral mandates are all about.

    Undoubtedly, some of these “new green deal” laws will not be good ideas. But for those of us living in the Blueness, good luck.

    1. LarrytheG Avatar

      takes fossil fuels to grow corn/soy beans, etc, no?

      1. Stephen Haner Avatar
        Stephen Haner

        And then the decayed matter produces methane!

        1. LarrytheG Avatar

          yes… the do-gooder types sometimes don’t look beyond the immediate – on a lot of things… it’s the sound-bite culture that too many live in – like with inflation.blame .. eh?

      2. energyNOW_Fan Avatar

        Recently read that soy beans may have an eco-advantage over corn, because soy beans can fix nitrogen from the air. Thus not so much need for natural gas based (ammonia) fertilizers. Of course, it’s not to hard to beat growing corn from an eco-perspective, in any case.

  6. Scott A. Surovell Avatar
    Scott A. Surovell


    This is a helpful and mostly accurate analysis except I want to make one thing clear – the industry did not request this bill and they did not “write it.”

    This bill arose out of conversations that I have been having over the last two years. Methane was a major focus of the UN COP26 Climate Change Conference in Glasgow, Scotland ( where President Biden signed a pledge to reduce American methane emissions by 30% and directed EPA to develop regulations to start that process.

    The draft I sent to DLS did not come from the LDC’s. I had the bill written up. It was sent to the five Virginia incumbent LDC’s after an initial draft was put together. All of them were not excited about pressing the policy for different reasons. Different LDC’s had different priorities and there was no unanimity – even at the end.

    After multiple discussions with the LDC’s, we took the legislation to the environmental community who provided feedback. Changes were made at their request (not all of their changes). There were two primary stumbling blocks with the environmental community. First, they wanted to set an overall methane reduction goal (similar to the VCEA) and second, they wanted to exclude combined feeding operations (CAFO’s) from the possible projects.

    The natural gas industry is very different than electricity and we don’t even know what baseline to set for methane emissions because it involves five different LDC’s at different stages of efficiency, literally thousands of other sources, the LDC’s don’t make methane (unlike the power companies that make CO2), and we don’t have a firm sense of what overall Virginia methane emissions actually are at this point given the multiplicity of sources. Excluding CAFO’s would have killed the bill and there is a whole side story to that.

    The final legislation was a give-and-take between various stakeholders and ultimately myself and Delegate O’Quinn decided on what we would include in the bill.

    1. Stephen Haner Avatar
      Stephen Haner

      Senator, if I were to list a half dozen legislators who could initiate something like this, you would certainly be a among them. Another reason I hadn’t really written about it until now was I didn’t attend the session or committees in person and didn’t get my usual immersion in this. If I’m going to keep doing this I need to get back down there. You were not a “recruited” patron and I regret the error.

      But I return to the issue that brought you into the earlier comment string and motivated me to write (getting it wrong sometimes). The “threat” of methane is way overstated, the recent NOAA “hair on fire” press release about measuring a few more parts per billion was alarmist nonsense at its worst, and the vast majority of it comes from either natural or agricultural sources that are not going away. A 30% reduction (if you mean all methane from all sources) is not achievable. Reducing leaks is a reasonable goal. For those who want to just end using it as a fuel, well, that would certainly reduce it from that source. But the wetlands, rice paddies, termite hills, landfills, oceans and even the non-agricultural wildlife would still be farting or burping it out from the bacteria in their gut. As do you and I. 🙂 ‘Tis a byproduct of life.

  7. Jim Kibler Avatar
    Jim Kibler

    For those wishing a more detailed analysis as to whether curtailing methane emissions from natural gas systems is cost-effective, attached is a link to an an analysis of the marginal abatement cost of methane emissions reductions across the value chain – except distribution (utilities). It concludes that there are cost-effective emissions reduction opportunities, meaning, it is less expensive to identify, prevent, and capture fugitive emissions in many cases, as the control methods to capture fugitive methane at a cost less than the market price of the gas itself. This study predates a lot of terrific technology that has been developed in the last few years, so it is dated, but even at its vintage, is still quite relevant to the policy discussion. So, while you may have an opinion about whether methane is worth worrying about (and you would be in a very small minority of learned persons on the topic), it is most often (and in my opinion almost always) quite beneficial economically for gas customers when emissions are controlled.

    The reason that utilities are excluded is that their operations generally contribute a very small fraction and the costs of addressing that remaining fraction can be high, especially in states like Virginia where smart policy has favored utility investments in pipeline replacement, rate decoupling, and energy efficiency under the SAVE and CARE Acts, which this legislation tweaked. So the best opportunity for Virginia gas utilities to make cost-effective emission reductions in the gas delivered to customers is to enable them to present opportunities to the SCC related to reductions in the emissions profile of the gas they procure.

    Curiously, Tennessee has adopted this same policy approach. See SB 1959 (2022).

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