Dive Brief:

• Xcel Energy announced on Wednesday a pilot program to purchase natural gas from a Colorado supplier with tighter emissions controls, certified by Denver-based standards company Project Canary as "responsibly sourced gas."

• The utility will pay a premium to Crestone Peak Resources, which minimizes methane leakage in the production and transport of natural gas by continuously monitoring activity through Project Canary’s technology. The results, which will be tracked starting this spring through early 2022, will be third-party certified by the Payne Institute at the Colorado School of Mines.

• Some clean energy advocates say the industry should already be continuously monitoring for methane leaks. The natural gas industry is "doing everything in their power" to delay a phase down in gas plant buildouts due to climate action, said Bruce Niles, executive director of climate imperative at Energy Innovation, calling "responsibly sourced gas" the new "clean coal."

Dive Insight:

Xcel is targeting an 80% carbon reduction in its own operations by 2030, but is separately working with natural gas suppliers through efforts like this pilot to mitigate additional leaks and emissions in the system.

"For that 80% target, we do not take credit for the greenhouse gas emission reductions (in this case methane) occurring in the gas supply chain. However, we are always striving to deliver the cleanest natural gas for our customers, and we want to work with suppliers to minimize their methane leakage," Xcel spokesperson Julie Borgen said in an email.

The U.S. natural gas sector has faced criticisms for its upstream emissions. In November, the French electric utility Engie pulled out of a $7 billion to buy U.S. liquefied natural gas (LNG) from LNG exporter NextDecade, citing the methane emissions in the nation's system. 

Project Canary has reached deals with a number of gas firms in recent months, including NextDecade. Crestone's current production volumes are 100% certified by Project Canary, after beginning a large-scale pilot using its continuous air quality monitoring technology in January 2020, according to Jason Oates, Crestone's vice president of government affairs and public relations.

"Our goal, together with other sustainability leaders in the natural gas value chain, is to ensure the methane emissions intensity from our natural gas production is less than 1% – that is, methane emissions amount to 1% or less of the total amount of natural gas we produce," Oates said.

The pilot with Xcel will run through early next year, tracking the methane factor of the gas purchased to heat the equivalent of about 20,000 homes per day. 

As a supplier, Crestone's practices to create low emissions intensity gas, or "responsibly sourced gas," include "changes to well design and construction, no flaring of fugitive methane, tankless sites whenever possible ... and continuous monitoring for methane" and other emissions, to fix leaks immediately, he said.

Project Canary's monitoring, known as its TrustWell certification, provides 10 times the amount of datapoints that are typically recorded for wells, CEO and co-founder Chris Romer said.

Project Canary, a certified B corporation, or Public Benefit corporation, received funding this spring from other venture capital groups invested in natural gas, including Quantum Energy Partners, Global Reserve Group and Energy Impact Partners.

Most wells in Colorado are inspected within 90 days of a leak, but "monitoring helps correct real time, literally within hours," he said.

"To be clear, when you have an independent party setting up an independent standard, it allows people to judge by a third party," Romer said of "responsibly sourced gas."

According to Romer, utilities are increasingly investing in this new trend of certifying lower emissions intensity in gas supplies.

"This is driven by the buy-side of the market. Many people expect this to be driven by the regulatory side, but there have been 17 trades where a buyer, mostly utilities, have paid a premium" for a lower emissions certification, Romer said. Project Canary certified 13 of those 17 deals, he said.

Environmental groups that advocate for decarbonizing the power sector warn that low emissions intensity brandings might create undue confidence in the future of fossil fuel.

"While it's a no brainer that any extraction of fossil fuels should be done in the most responsible way, we need to stop pretending that we can cleanse gas of its harms. The 'cleanest natural gas on the planet' is not clean," Gillian Giannetti, senior attorney at Natural Resources Defense Council, said in an e-mail.

Niles said that buzzwords like "clean coal" effectively encouraged policymakers to support extensions of coal plants, adding that "responsibly sourced gas" could lead to similar results.

Romer dismissed those concerns, pointing to the third-party certification of their data, and wider efforts to reduce methane emissions in the natural gas sector.

"That is completely inaccurate; the UN and the Biden administration have identified that eliminating methane emissions is the strongest lever our generation has to impact climate change. Project Canary's mission is to stop methane leaks. That's our focus," Romer said.

Xcel's 80% target will require the utility to cut gas significantly as well as eliminate coal, Niles said. "If as part of that they are reducing the methane leakage from the gas, who's gonna argue with that? But it doesn’t take away from the importance of reducing gas use even faster."

Xcel is pursuing zero carbon emission dispatchable generating technologies, according to Borgen, which could include advanced nuclear, carbon capture, hydrogen or some other technologies that haven't yet reached cost parity. "Until those technologies are available, however, we will need to continue to use natural gas to maintain service when the sun isn’t shining and the wind isn’t blowing."

According to Xcel spokesperson Colleen Mahoney, the pilot "is purely about encouraging the market for suppliers to reduce emissions."