CARBON CREDIT LANDSCAPE
The carbon credit marketplace comprises various solutions to mitigate carbon dioxide emissions. Historically nature-based carbon solutions (“NCS”) have been the predominant techniques to mitigate carbon. NCS techniques involve improved forestry or agricultural management, afforestation, reforestation, wetlands preservation, among others. Recently, interest in marine-based NCSs have come under consideration (e.g., oyster reef rehabilitation or harvesting kelp). Over time, engineered carbon credit solutions have taken share from NCSs. Examples of engineered solutions include direct air capture (“DAC”), carbon capture & sequestration, enhanced carbon mineralization, or the manufacture of biochar. Credits tied to energy accounted for 56% of 20 million issued credits in August 2023, with forestry at 35%, emissions at 5% and waste & landfills at 4%.[6]
Leading independent carbon crediting programs (so called “voluntary”) include American Carbon Registry, Architecture for REDD+ Transactions, Climate Action Reserve, Global Carbon Council, Gold Standard, Puro.Earth and Verra. These organizations publish, administer and/or steward methodologies or protocols whereby stakeholders create, register and sell carbon credits, offsets, insets and equivalents. The voluntary carbon marketplace caters to private sector buyers and sellers of carbon credits who self-report their stated goals toward reducing carbon footprints, whether abiding by the United Nation’s Sustainable Development Goals or otherwise.
In contrast to independent organizations, there are also regional compliance markets administered by states such as California Air Resources Board, Regional Greenhouse Gas Initiative and Western Climate Initiative in North America, as well as federally oriented ones such as the European Union’s Emissions Trading System (“ETS”) or China Certified Emission Reduction. Additionally, Xpansiv, NASDAQ and Intercontinental Exchange increasingly seek to create liquidity and organizational structure to the voluntary marketplaces.
Totality’s Registry is established as an engineered carbon solution to abate greenhouse gases (“GHG”, typically arising from methane leaks or from eliminating marginal oil & gas production) through the plugging & abandoning of oil and/or natural gas wells.
Our first methodology (“GHG Abatement – Methane Leak”) addresses the measurement of a well’s emissions, an inherently complex undertaking given a well’s individual physical attributes, location and surrounding conditions. Usually, handheld devices, such as gas sniffers, can be utilized to detect the presence of gases and can be configured for combustible gases and/or other gases of interest.
Totality’s GHG Abatement – Methane Leak Methodology requires a Project Developer to analyze and measure a well’s gas concentrations, such as parts per million or percent volume, as well as its molecular composition and emissions flow rate. Optical gas imaging (“OGI”) cameras[7] are expensive and typically do not provide a concentration or flow rate, though algorithms are being refined to do so. OGI cameras are primarily designed for visualizing leaks from oil and gas infrastructure, limiting their use to detecting the presence or absence of gas. Emissions rates can be measured using high volume samplers, static and dynamic chambers, and combinations of various techniques. Due to the rapidly changing nature of technology and methods for measuring methane leaking from orphaned wells, novel approaches are under review (e.g., optical absorption spectroscopy).
In a study of 568 abandoned wells in the US states of OH, WY, UT, CO, PA, and WV, and Canadian provinces of NB and BC, reported methane emission rates range from 1.8 × 10-3 grams/hour to 48 grams/hour per well depending on the plugging status, well type, and region, with the overall average at 6.0 grams/hour.[8] Studies of Appalachian Basin wells known as “Kang et al. 2016” and “Williams-Small et al. 2016” have been cited at 31 grams/hour and 28.01 grams/hour per well of methane emission factors, respectively.
Our second methodology (“GHG Abatement – Marginal Well”) addresses a category of oil & gas wells that are either currently producing low volumes of hydrocarbons or maybe inactive, shut-in or idled oil & gas wells with no current hydrocarbon production (yet have the opportunity to be returned to active status). Our GHG Abatement – Marginal Well Methodology allows for a Project Developer to forecast future hypothetical volumes of methane, crude oil and natural gas liquids through two approaches, both utilizing industry standards from the Society of Petroleum Engineers Oil and Gas Reserves Committee, Petroleum Resources Management System: 1) volumes of hydrocarbons are limited by the economic life of remaining reserves; or 2) volumes of hydrocarbons are limited by an engineered decline curve with a predetermined limited crediting period of ten (10) years. Given the founders’ long-standing experience in the oil & gas industry, Totality is comfortable with its ability to assess the Project Developer’s quantification of the Project CO2e Reductions, as Validated and Verified by third-party service providers.
The GHG Abatement – Marginal Well Methodology places critical importance on the transparency of Project Developer’s costs toward executing a Project. Furthermore, Totality places high importance on the surface estate impacts (removal of Production-related Infrastructure and any voluntary Environmental Reclamation). Totality also enables the inclusion of Afforestation and Reforestation practices to the surface estate so as incorporate Valid and Verified Project Environmental Attributes CO2e. Our orientation therefore contends that the GHG Abatement – Marginal Well Methodology can be utilized (pending Project Developer’s strategy) both as an ‘avoidance’ methodology but also a ‘removal’ methodology.
The Environmental Protection Agency (EPA) references a 2022 study that stated 70% of the more than 900,000 onshore oil and gas wells in the U.S. were low-producing in 2021, and that these wells accounted for only 7% of 2021 U.S. oil and gas production but were responsible for approximately 60% of the U.S. natural gas production emissions and about 40% of the U.S. oil production emissions. [9] In addition to these marginal wells, Totality estimates there are additional wells that are not currently in production, thus are inactive, shut-in or idled marginal wells.
[6] https://aegis-hedging.com/insights/ Voluntary Carbon Market Update, August 2023.
[7] Inclusive of various technologies being so called stereo, LIDAR, magnetometer, HSI
[8] Williams, J.P., Regehr, A. and Kang, M. 2021, “Methane emissions from abandoned oil and gas wells in Canada and the United States” in Environmental Science & Technology, 55(1):563-570. https://doi.org/10.1021/acs.est.0c04265
[9] https://www.epa.gov/natural-gas-star-program/marginal-conventional-wells and referenced study by GSI Environmental titled “Quantification of Methane Emissions from Marginal (Low Production Rate) Oil and Natural Gas Wells (DOE-GSI-31702)” as found at https://www.osti.gov/servlets/purl/1865859/.