Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your experience. Save up to 40% More details

U.S. natgas producers hope customers will pay more for 'green gas'

Stock Markets Jun 30, 2021 08:05AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
2/2 © Reuters. FILE PHOTO: A liquefied natural gas (LNG) tanker is tugged towards a thermal power station in Futtsu, east of Tokyo, Japan November 13, 2017. REUTERS/Issei Kato 2/2

By Liz Hampton and Scott DiSavino

(Reuters) - U.S. natural gas producers hope climate-conscious electric utilities and gas exporters will pay a premium for what they say is "greener gas" that has been certified as coming from low-emission operations or from renewable sources such as landfills.

EQT Corp (NYSE:EQT), Chesapeake Energy (NYSE:CHK) and liquefied natural gas firms Cheniere Energy (NYSE:LNG) and NextDecade (NASDAQ:NEXT) Corp are among the companies considering low-carbon certifications from groups such as Denver-based Project Canary. Gas certified as "responsibly produced" and contributing less emissions could get up to 5% above market prices, or up to 15-cents per thousand cubic feet (mcf), proponents say.

So far, not many customers have been willing to pay the premium -- a problem for firms trying to sell lower-carbon versions of fossil fuels. Some European buyers have shunned U.S. shale gas and several U.S. cities including New York and San Francisco have sought to ban new residential gas connections over environmental concerns.

In 2020, the pandemic rocked the economy and U.S. gas prices fell to a 25-year low average of $2.11 per mcf. Idle drillers pushed U.S. gas output down 2%, the first annual drop in four years. While power plants consumed a record amount of gas in 2020, wind and solar have been gaining market share as preferred alternatives to dirtier coal for electric generation.

With the economy recovering, U.S. benchmark gas prices are up over 40% this year to about $3.70 per mcf.

“When you’re talking about trillions of cubic feet of global gas production, mere pennies in price movement can make all the difference between profitability and losses," said Kentaro Kawamori, chief executive of Persefoni, which develops tools to measure a company's carbon footprint.

Utilities, the biggest gas buyers, have endorsed net-zero emissions targets, "but it is not being translated into procurement departments," said Chris Kalnin, chief executive of U.S. shale gas producer BKV Corp.


BKV aims to certify its fuel as "responsibly" produced and hopes for a commitment from electricity generators, he said. Continuous monitoring for certification can cost 1 to 2 cents per mcf, which is a hurdle along with competing measurements. Executives also noted that utility regulators who approve rate increases for gas purchases have yet to consider carbon emissions in price reviews.

Cheniere, the top U.S. liquefied natural gas (LNG) exporter, believes cleaner gas may become a requirement for producers and exporters.

"We don't expect to pay a premium, we don't expect to collect a premium" for gas certified as greener, said Anatol Feygin, chief commercial officer at Cheniere. The company is the biggest buyer of gas in the United States for its LNG plants, accounting for about 7% of U.S. production.

One problem is the lack of standard measures. Cheniere has launched an effort with five shale firms to evaluate and measure emissions, said Feygin. Project Canary, Rocky Mountain Institute (RMI) and their Environmental Defense Fund also are pursuing their own techniques to rate environmental footprints.

Cheniere said it has been in discussions with gas suppliers for about three years on emissions but "it's early days and we have not settled on the methodology" for rating producers.


Pension funds and other big institutional stock market investors also want energy firms to reduce their carbon footprints. Producers who account for 10% to 11% of U.S. gas production have embraced ratings, mostly with Project Canary. The Denver firm has dozens of big companies planning to use its measurements, a spokesperson said.

To arrive at its green rating, Project Canary monitors 600 items including methane emissions, use of fracking fluids and waste water disposal.

It also could take time to get buyers and sellers to agree on contract terms. Utilities would need regulators to approve higher rates for responsibly sourced gas. That, said Project Canary CEO Chris Romer, requires "a politically complicated process."

Romer hopes LNG buyers will require producers to have their production and transportation processes vetted. About 7% of U.S. gas production last year was exported as LNG to Asia, South America and Europe.

"Foreign purchasers of LNG are raising the bar," he said. LNG developer NextDecade signed up with Project Canary after it lost a deal with French utility Engie SA over environmental concerns.


So far, no utilities have built low-emissions sources into routine gas purchases although some, including Sempra Energy (NYSE:SRE)'s Southern California Gas (SoCalGas) unit, Xcel Energy Inc (NASDAQ:XEL) and New Jersey Natural Gas, have purchased cleaner gas for small portions of their operations.

SoCalGas wants to source 5% of the gas it sells from renewable natural gas by 2022 and 20% by 2030, said Jawaad Malik, chief environmental officer at SoCalGas. Legislation that would allow the utility to buy the fuel has not yet passed, he said.

Gas produced from animal farms and landfills, called renewable natural gas, is selling at a premium to market rates, but supplies of the niche fuel are vastly more limited than conventional gas and very costly.

RNG can fetch between $15 to $100 per mcf depending on contract volumes because it is largely methane, a powerful greenhouse warming gas. Even using RNG for a fifth of gas supplies can offset a company's total carbon emissions, said Aaron Ruby, a spokesman for Dominion Energy Inc.

"It does not take a lot of RNG to get a whole lot of climate bang for your buck," Ruby said. Dominion plans to collect RNG from livestock farms that would capture 3.5 million metric tonnes of carbon dioxide (CO2) equivalent emissions per year.

U.S. natgas producers hope customers will pay more for 'green gas'

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at’s discretion.

Write your thoughts here
Are you sure you want to delete this chart?
Post also to:
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (2)
Alan Rice
Alan Rice Jun 30, 2021 1:40PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Green-washing: mankind's answer to the impending extinction "delimma".
Barak David
Barak David Jun 30, 2021 5:46AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Gas?! ****no! we want renewable energy, its cheaper more reliable and clean. whats the point of using anything else?
Thomas Henry
Thomas Henry Jun 30, 2021 5:46AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Bill Melton
Bill Melton Jun 30, 2021 5:46AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Guess what wind turbines need to operate? Lubricants from fossel fuel. How do they get turbines into location? Trains, which use diesel. Large trucks and cranes that use diesel. The dirty secret on wind turbines is that they are made of steel. Most steel in the world is made in basic oxygen furnaces, & most of those furnaces use coal as their heat source. Most wind turbines are made in Germany & China. Oh yea, when one of those turbines quit working, nothing happens. The company that installed the turbines use tax credits to install them. There is no incentive to repair it. All of this to say that until there is a product that has a real market, fossil fuels are the only other option. FACTS vs Ideology.
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
Sign up with Email