ESG Certifications For Natural Gas Create Strange Bedfellows

The process of certifying U.S. natural gas production for ESG (Environmental, Social and Governance) purposes gained heightened importance in recent weeks as pressure mounts on the domestic liquefied natural gas (LNG) export industry to provide increasing volumes to Europe to help wean the continent off its dependence on gas from Russia. As I wrote here last May, a rising percentage of customers in Europe and other parts of the world are requiring proof that the natural gas they purchase was produced and transported in an environmentally sound manner before they are willing to accept it.

The result has been the creation of a small cottage industry of companies that specialize in creating and performing valid processes for gas producers to complete in order to have their production certified. Once such company, MiQ, reported this past week that “350bcf of U.S. produced Independently Certified Gas (ICG) is currently available on its Digital Registry ready for trading,” a significant volume of gas that it says is equivalent to 100 cargoes of LNG.

To received the MiQ certification, the company producing the gas is required to retain an MiQ-approved auditor to conduct surveys at a representative sample of sites using LDAR cameras that can identify methane leaks on one day each quarter. The results are then extrapolated across the company’s full production base to determine whether they meet MiQ’s certification standard. It’s a process similar to conducting a public opinion poll, one that MiQ admits will have some margin for error.

The certifications issued by MiQ are applicable for a 12-month period, during which time the producing company would presumably continue conducting the quarterly inspections and making the extrapolations in preparation for the next certification period. Whether or not this sort of process is rigorous enough to meet standards required by the Securities and Exchange Commission when it inevitably finalizes its proposed regulations on ESG-related disclosures in some form cannot be known at this point. Nor can it be known whether this audit process of samples and extrapolation and estimation with an admitted margin for error will be sufficiently credible to satisfy the array of industry critics who are always looking for ways to justify claims of “greenwashing.”

What can be known is that, as in so many aspects of the energy business in the U.S., the ESG area is one that is creating some strange bedfellows, and MiQ is a great example of that. MiQ, launched in December, 2020, was formed as a non-profit organization through a partnership with London-based, for-profit SYSTEMIQ and the Rocky Mountain Institute (RMI).

On its website, SYSTEMIQ says its mission is to “catalyse good disruptions in economic systems that will speed the achievement of the UN Global Goals and the Paris Climate Agreement” in an effort designed to work with partners to “move to a low-carbon, regenerative and socially just economy.” That’s not exactly the same as the missions of most oil and gas companies, which are at their core to produce the oil and natural gas needed to meet the world’s demands for those products and the thousands of different products derived from them.

RMI’s mission is even more succinct: “Transforming the global energy system to secure a clean, prosperous, zero-carbon future for all.” Across the last 30 or so years, this kind of feel-good corporate speak has become essentially code to thinly disguise efforts to eliminate fossil fuels from the energy mix. And in fact RMI has been active in a wide array of efforts to discriminate against natural gas, including efforts to ban it from buildings and in cooking.

None of this is surprising when one discovers that RMI’s list of major donors includes anti-natural gas groups like Bloomberg Philanthropies, ClimateWorks Foundation, Energy Foundation, Hewlett Foundation, High Tide Foundation, MacArthur Foundation, Oak Foundation, Rockefeller Brothers Fund, The Rockefeller Foundation, and the Tides Foundation. It’s like a murderer’s row of the big funders of natural gas opponents. Somewhat befuddling on this donor list, though, are the energy producers who could now stand to be accused of conflicts of interest should they secure their natural gas certifications with MiQ.

In its press release, MiQ says it is “working with the world’s biggest oil and gas companies to provide the data to drive change.” Perhaps the company is able to somehow fully segregate its certification services for the natural gas industry from the efforts by its partners to discriminate against or eliminate it, but these various conflicts seem troubling at best.

As it happens, CEOs from some of those big oil and gas companies were slammed by Democrats at a recent congressional hearing on specious, unsupported claims of price-gouging. At the same hearing, at least one Republican member also criticized them for being too willing to work with their own industry’s opponents. If the executives wondered about the reasons behind that latter criticism, this is one good example.

There is nothing wrong with efforts to have gas certified for ESG and the cottage industry growing up to meet the challenge. Indeed, much good can come from it, because when done right, it will be helpful to the industry’s efforts to reduce its methane emissions footprint. But partnerships like these will always raise uncomfortable questions, and with Republicans appearing poised to regain majorities in both houses of congress in November, these executives will need to have ready answers when those questions inevitably arise.