Hitting the Mark:

Improving the
Credibility of Industry
Methane Data

Environmental
Defense Fund

February 2020
Hitting the Mark: An Approach to Validating Methane Emissions Data and Targets EDF

Foreword
Sacha Sadan
Director of Investment Stewardship
Legal & General Investment Management

From Hong Kong to Houston, we have a problem. Greenhouse gas emissions are at an all-
time high, when they should be fast moving towards zero. As one of the world’s 15 largest
investors, addressing the climate emergency is a priority for us and for our clients; the work
of thought leaders such as Environmental Defense Fund continues to be instrumental in
shining a spotlight on this risk.

Reaching net zero emissions will require significant changes across the entire global
economy, yet some of the greatest challenges lie in the oil and gas sector. There is no doubt
that oil and gas have a role to play in the energy transition. But whether it is a starring or
supporting role will in large part depend on the industry’s approach to methane. Currently,
an estimated 2% of the world’s produced gas is being lost to the atmosphere as methane,
a greenhouse gas that is over 80 times more potent than carbon dioxide over a 20-
year timespan. This makes neither climate, nor business sense. Yet there are immediate
opportunities: for an estimated half of the world’s methane emissions, capturing and selling
the gas could be worth more than the tech upgrades involved.

So where should companies start? As ever, with the numbers. This report outlines an
important new approach to measuring and reporting methane emissions. Currently, there
are challenges to methane data availability and accuracy, with status quo methods often
underestimating the reality of potent emissions into the atmosphere. As investors, we place
great value upon the continuous journey of data integrity. Our expectations around the
quality of companies’ climate disclosures are thus evolving fast, in many cases going well
beyond compliance with government mandated reporting. From satellites and sensors to
drones and AI, companies should draw on the latest advances in science and monitoring
technology to present a more accurate picture of their business impacts.

We believe that strong oversight of a company’s operations correlates with good

management and, therefore, with success in the future. For us, this is about financial
materiality and core corporate strategy – about risk management, not “corporate social
responsibility”. Indeed, from savers to pension schemes, an ever-growing number of our
clients are interested in the climate impact of their investments, looking for reassurance that
the energy companies they invest in will at least survive, or even become an active part of
the solution.

The extractive industry treats zero accidents as the only acceptable target. Zero tolerance for
methane emissions should similarly become the norm. And we are seeing signs of progress,
with a growing number of companies aiming for zero emissions - from their rigs through
to the end consumer – even linking these targets to executive and employee pay. Although

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Foreword
headline commitments are key to setting strategy, we know the hard work lies in the less
glamorous, but just as important step of implementing and measuring progress through
the necessary processes and data systems. This innovative report provides companies with
a roadmap to go from telling what they will do to credibly showing what they have done.
Giving investors a toolkit to better differentiate between the leaders and laggards. We can
then take action by voting at investee companies.

Our challenge is clear: industry leaders have an opportunity and an obligation to keep
raising the bar, while all other companies should aim to catch up. As a significant investor
in the energy sector, we will continue to work with companies and stakeholders like EDF
to drive the adoption of best practices in the industry and advance essential policies and
regulations.

This innovative report provides companies

with a roadmap to go from telling what
they will do to credibly showing what they
have done. It gives investors a toolkit to
better differentiate between the leaders
and laggards.

LGIM is the investment management arm of Legal & General Group, with assets under
management of $1.4 trillion (as at 30 June 2019, including assets managed by LGIM in
the UK, LGIMA in the US and LGIM Asia in Hong Kong. The AUM includes the value of
securities and derivatives positions).

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Executive Summary
Methane emissions are a challenge to the global oil and gas industry and the role and
reputation of natural gas in a decarbonizing world. Credibly demonstrating near-zero methane
emissions is both an imperative for the industry writ large, and a competitive differentiator for
companies in the early phases of the energy transition.

Leading companies and coalitions are taking steps to address this challenge, including
commitments to time-bound, quantitative methane targets, and implementation of best-
management practices and innovative technologies to achieve reductions. While these initial
steps are necessary, the fundamental question persists: Will industry leaders prove that they are
making sufficient progress on reducing methane emissions? The answer to this question relies
heavily on the quality of industry’s data and the level of public trust in it.

Today, the oil and gas industry has a methane-emissions data problem. The majority of
emissions data is derived from desktop calculations informed by engineering equations, not
real-world measurements. This has significant consequences. Around the world, research reveals
that methane-emission inventories consistently underestimate, and in some cases overestimate,
real emissions. For example, a paper published in Science by experts from more than a dozen
research institutions, including Environmental Defense Fund, found that methane emissions
associated with U.S. oil and gas production are 60% higher than EPA estimates, which are
derived from calculations.

Improving the accuracy of emission estimates is necessary to instill confidence that progress is
being made. Encouragingly, advances in methane detection and quantification technology can
support robust methane measurements across varying spatial and temporal scales.

While the journey begins with increased and improved data acquisition, it does not end there.
This paper explores three critical actions that executives must champion to improve data
accuracy and earn stakeholder confidence that methane commitments are real.

1 Integrate direct measurement into emissions estimates. All companies with methane
targets must ramp up field measurement to bolster emission inventories with actual
emissions data. Specifically, companies seeking to accurately quantify methane emissions
should conduct bottom-up measurements and integrate these findings with top-down,
site-level methane emissions measurements taken from a statistically representative
sample of facilities.

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2 Increase the transparency and granularity of methane emissions reporting.

Despite incremental progress, industry reporting on methane management and
performance often still falls short of external stakeholder needs. As companies increase
measurements to inform emissions reporting, the soundness of methods, the care
with which they are applied, and the accuracy of the data they produce, are essential
to earning credibility with external stakeholders. Additional information such as the
methods applied for measurement and sampling plan design, emissions inventories
broken out by region, country and/or basin, and the summary findings from third-party
audits all contribute to the trustworthiness of methane disclosure.

3 Validate reported methane data through a qualified and independent third-party

audit. Companies that report emissions data should take additional steps to ensure the
validity and credibility of information, particularly as public trust in the oil and
gas industry continues to strain. External auditing by an established, independent
firm can add value and improve public confidence in emissions disclosure. As the
methane-auditing space matures, third-party auditors will need the technical expertise
to rigorously assess both the accuracy and integrity of the data as well as the quality of
the methods.

The first half of this new decade are defining

years in which oil and gas companies
must prove to investors, civil society, and
governments that they are materially
reducing their methane emissions. This
paper provides recommendations and
considerations for companies and coalitions
as they work to demonstrate progress amidst
the climate crisis.

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Acknowledgments

EDF appreciates the

constructive engagement
from a range of diverse
experts who contributed
valuable perspectives on
drafts of this paper.

Lead Author
Isabel Mogstad

Contributing Authors
Meghan Demeter
Dr. David Lyon
Ben Ratner
Dominic Watson

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Introduction
As the climate crisis deepens, business and government leaders increasingly recognize the
urgent need to transform the energy system on a pathway to net-zero carbon emissions by
mid-century. A critical and immediate step on any credible pathway is to dramatically reduce
methane emissions from the oil and gas sector. While governments have the responsibility to
enact policies and regulations that drive emissions reductions, industry bears the responsibility
— and has the opportunity — to take concrete action and demonstrate rapid progress.

The first half of this new decade will determine if industry is up to the task. Industry groups
like the Oil and Gas Climate Initiative (OGCI) and One Future have publicly committed to
reach stringent, quantitative targets for methane emission intensity performance by 2025.
Many operators have set their own reduction targets, with more likely to follow, as investors,
governments and the public demand action. The question now is simple: Will industry leaders
prove that they are making progress on reducing methane emissions against the targets they
themselves have set?

The question now is simple: Will industry

leaders prove that they are making progress
on reducing methane emissions against the
targets they themselves have set?
Acquiring and reporting high-quality data is indispensable for earning credibility on any
Environmental, Social, Governance (ESG) criteria, and is particularly important in methane
emissions management. An invisible and odorless gas that can be emitted at various points
and times from the oil and gas supply chain, methane presents challenges for monitoring
and measurement. Encouragingly, innovation — from methane-quantifying satellites to drone-
mounted sensors, to stationary, continuous monitors — is unleashing a new era of higher-
quality, comprehensive emissions data. Now is the time to embark on a strategic transition from
"analog" to measurement-based methods of estimating methane emissions.

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The purpose of this paper is to:

Establish the direction for a new, direct measurement-informed

approach for estimating and validating methane emissions.

Galvanize an action-oriented dialogue among leaders and experts

about how such approaches can be quickly realized at cost-
effective scale.

Provide guidance and considerations for companies and

coalitions as they pursue credible, accurate measurements.

These improvements have the potential to increase the accuracy, precision and
credibility of emissions data, while earning the confidence of investors, non-
governmental organizations, governments, and the public in methane emissions
management efforts. We urge business leaders to invest in the people and the process
to make good on their methane emissions commitments by striving for robust, accurate,
and transparent data that can verify strong emissions performance.

Environmental Defense Fund

invites and encourages constructive
discussion and accelerated action on
this essential facet of the methane
challenge in the months to come.

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Part 1: An approach
to enhance emissions
estimation

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Key Recommendations

Incorporate emissions estimates Integrate top-down and

based on methods using direct bottom-up measurement
measurement across varying spatial data to validate emissions
scales. inventories and enhance
methane mitigation strategies.
Conduct methane measurements on
a statistically-representative sample
of facilities to inform corporate-level
methane emissions inventories.

The terms “bottom-up” and “top-down” do not have a standard definition and are often used
inconsistently. Typically, “bottom-up” refers to the traditional emission inventory approach that
relies primarily on component-level emission factors and engineering equations, while “top-
down” refers to the use of atmospheric measurements to estimate emissions at larger spatial
scales. However, this distinction is not always clear since both approaches can utilize emission
factors and/or atmospheric measurements. For example, component-level emission factors can
be based on measurements of methane concentration near the leak. Meanwhile, downwind
atmospheric measurements of sites can inform site-level emission factors. For this report, we
distinguish between bottom-up and top-down based on the spatial scale of emission estimates.
We define “bottom-up” as an approach that estimates emissions at the component-level, such
as a connector or pneumatic controller. We define “top-down” as an approach that estimates
emissions at a larger spatial scale than component, ranging from facility-level to large geographic
areas like a basin. In both top-down and bottom-up approaches, direct measurement is critical to
the integrity and accuracy of the outputs.

While we advocate in this paper for the increased use of top-down data to estimate emissions,
we do not recommend that companies no longer collect component-level, bottom-up data. As
we explore, bottom-up methods have limitations that make them unsuitable as the sole data
input for accurately estimating total emissions. However, component-level measurements remain
valuable for understanding the sources of emissions, guiding mitigation, and reconciling total
emissions. A holistic approach with complementary methods offers the greatest promise.

Traditionally, methane emissions from upstream oil and gas operations have been estimated
using bottom-up emission factor approaches herein referred to as Bottom Up Emission Factors or

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(BUEFs) such as generalized and static equipment and component-level emission factors and
engineering equations. These approaches are currently standard practice for both voluntary
emissions reporting and regulatory compliance in many jurisdictions around the world. For
example, the EPA uses BUEF methods for their annual greenhouse gas inventory and requires
companies to use this approach for submissions to the EPA Greenhouse Gas Reporting
Program.

FIGURE 1. GENERAL EMISSIONS ESTIMATION EQUATION FORMULA

The general equation for where:

emission estimation is:

E = emissions
E = A x EF x (1-ER/100) A - activity rate
EF = emission factor
ER = overall emission reduction efficiency, %

SOURCE: Environmental Protection Agency 2014 National Emissions Inventor y Report.

Over the last several years, advances have been made in atmospheric methane measurement
techniques — herein referred to as “top-down” approaches. Atmospheric techniques measure
concentrations of methane emissions from a variety of distances away from a source – from
on-site devices such as drones that measure emissions from equipment groups to satellites
that remotely quantify methane emissions over a large geographic region. From these
measurements, total emissions for a defined area can then be calculated based on knowledge
of how methane disperses in the atmosphere. Measurements of total methane emissions
using top-down approaches can be significantly higher than aggregated, component-level
emissions estimates calculated with emission factor-derived, bottom-up methods.

Top-down approaches have some limitations, particularly related to the relatively short
duration of individual measurements. Since emission rates can vary widely across time
and space, it is critical that top-down measurements are temporally and conditionally
representative when they are used to extrapolate emissions across a wider area or time frame.

Throughout this paper, we consider top-down site-level measurements as the overall emissions
for a specific site, inclusive of all possible emitting components and equipment, to be most
accurately quantified using atmospheric measurements.

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In both top-down
and bottom-up
approaches, direct
measurement is
critical to the integrity
and accuracy of the
outputs.

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Bottom-up emission factor-based approaches

Bottom-up, emission factor BUEF approaches, which traditionally rely on desktop equations
instead of measurement for estimating methane emissions, have limitations that are well-
documented and pose a material risk to the accuracy and reliability of reported methane
emissions data.1 Companies can address some of these gaps by integrating measurement-based
approaches across spatial scales to enhance the credibility of reported emissions and validate
progress against methane reduction commitments.

Studies in the U.S. and internationally have consistently found that inventories developed with
BUEFs can significantly underestimate methane emissions.2 For example, a paper published in
Science by experts from more than a dozen different research institutions including EDF found
that methane emissions associated with U.S. oil and gas production are 60% higher than EPA
estimates based on BUEFs. This discrepancy is largely attributed to the limitations of BUEFs
to incorporate emissions from less-frequent, high-emitting sources and other intermittent
stochastic releases. Additionally, a meta-analysis of approximately 15,000 measurements from
18 peer-reviewed studies found that 5% of sources accounted for 50% of total emissions across
a range of equipment and facility types.3 To the extent that BUEFs do not include these high-
emitting events, current methane estimates are likely to significantly underestimate actual,
absolute emissions.

While the accuracy of BUEFs can be improved by increasing the size and representativeness
of the underlying measurements used to develop emission factors, there are challenges
to sufficiently eliminating the approach’s bias towards underestimation. First, it is difficult
to identify every piece of emitting equipment when collecting measurement data for the
development of emission factors. Second, contemporary approaches for directly quantifying
emissions at the component — or equipment-level — such as high-flow dilution sampling, have
technical limitations that can make quantification of higher flow rates unsafe or inaccurate.
Finally, existing modeling tools, such as the EPA-approved E&P Tank Model, are often
inaccurate under anomalous system conditions. For example, an oil tank may emit orders-of-
magnitude higher emissions than predicted from a static engineering equation if an upstream
separator malfunction causes produced gas to vent out of the tank. While BUEF methods
based on default emission factors and engineering equations remain valuable for developing
preliminary emission estimates, particularly for sources with no recent measurement data, they
should be replaced with more representative empirical data. This could include step-change
improvements such as updating emission factors based on new measurement data that fully
accounts for anomalous emissions.

1
See Environ. Sci. Technol. 2015, 49, 5, 3252-3261 and Environ. Sci. Technol. 2015, 49, 8, 5161-5169
2
See Science. 2018, 361, 6398, 186-188; PNAS. 2015, 112, 51, 15597-15602; Geophysical Research Letters. 2019, 46, 22, 13564-13573; Environ Sci.
Technol. 2017, 51, 21, 13008-13017.
3
Adam R. Brandt, Garvin A. Heath, and Daniel Cooley. Environmental Science & Technology 2016 50 (22), 12512-12520.

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While bottom-up emission factors, BUEFs derived from traditional desktop calculations, can
play a role in helping companies start to understand the general distribution of emissions across
certain equipment types — and support the design of methane mitigation strategies — they alone
cannot deliver comprehensive, accurate estimates of methane emissions required to credibly
report on target progress and garner investor and public trust. As a result, companies need to
move beyond a reliance on traditional factor-based methods for accurately estimating emissions.
Reliable reports of total emissions must incorporate empirical data captured using both bottom-
up and top-down measurement methods across a representative subset of sites.

Top-down approaches
Advances in atmospheric top-down measurement techniques enable methane emissions
quantification at various temporal and spatial scales, ranging from sub-site to basin. Compared
to bottom-up approaches that detect and measure emissions at the component or equipment-
level, top-down approaches quantify total emissions by measuring all the plume(s) in a target
area, reducing the likelihood that high-emitting sources are missed during the time of the
survey. Top-down approaches are most effective at detecting emissions when they are deployed
frequently, particularly for stochastic events that cause intermittent, high emission rates.
Numerous platforms can be used for atmospheric measurements, including stationary monitors,
ground vehicles, unmanned aerial vehicles (drones), aircraft, and satellites. These approaches
vary in their ability to resolve emissions at different temporal and spatial scales due to significant
differences in their detection limit, sensitivity and deployment frequency. For example, smaller,
agile platforms such as drones may be able to quantify emissions from a single site or cluster
of equipment by sampling local emissions plumes. In contrast, satellites often have coarser
resolution – measuring methane concentration through the atmosphere, coupling that data with
meteorological information, and estimating total emissions over numerous square kilometers.
Given the diversity in operating profiles – from the small wellpads of onshore U.S., to the mega-
facilities in the Middle East, to the complex offshore platforms in the North Sea – certain
technologies will be better suited to specific environments.

There are three established, general approaches for quantifying site-level methane emissions,
each of which includes several methods that have been tested by industry, academic researchers
and published in peer-reviewed scientific papers:

• Mass balance approaches measure methane concentration upwind and downwind of a

site or cluster of sites, typically with fixed-wing aircraft, and couple this data with wind speed
and other meteorological information to estimate total emissions from the area between the
upwind and downwind transects.

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• Inverse dispersion modeling measures methane concentration downwind of a site and

then calculates site-level emissions based on the estimated plume shape and magnitude,
wind data, and assumptions about atmospheric transport, such as Gaussian dispersion.
EPA’s Other Test Method 33a is a commonly deployed inverse dispersion modeling
approach that involves parking a research vehicle several hundred feet downwind of a site
for 15 – 30 minutes. Similar approaches have been conducted with drones, which may
use their enhanced maneuverability to distinguish and quantify plumes from individual
pieces or groups of equipment.

• Remote sensing visualizes methane plumes by measuring total column methane

concentrations between the ground and an aircraft, drone or satellite instrument.
Remote sensing data can be analyzed with techniques similar to the mass balance
or dispersion model methods to quantify emissions. The resolution of remote sensing
technologies varies significantly. Several aircraft-based approaches can quantify emissions
at the individual site level. Meanwhile, existing satellites typically have coarser resolution
and may be constrained to extremely large emissions sources with well understood,
complementary meteorological data.

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Spotlight: Hitting the mark with the

Oil and Gas Methane Partnership

The CCAC Oil & Gas Methane Partnership The inclusion of non-operated joint
(OGMP) was launched at the UN ventures in the framework will increase
Secretary General’s Climate Summit the reach of the program. The inclusion
in New York in September 2014. The of those emissions will provide the public
initiative currently has eleven partner greater insight into the environmental
companies, including both International footprint of the industry and allow
and National Oil Companies. In 2019, governments to better target reduction
a thorough redesign was conducted efforts along the entire value chain.
- substantially redefining the level of
ambition. Finally, a new institution hosted in The
United Nations Environment Programme
Starting in 2020, OGMP member (UNEP) is expected to issue a report
companies intend to embark on the disclosing each company’s aggregate
adoption of an approach similar to that emissions. It will also provide a view on
proposed in this paper. In the revised the state of global oil and gas methane
framework, companies will commit to emissions, correlating company reports
start reporting consistently using direct- with satellite data, national inventories and
measurement informed methods across science studies.
all operated, as well as non-operated,
assets.

OGMP includes five levels of reporting,

through which member companies
announce their targets and report
emissions, as well as their progress in
reducing reporting uncertainty.

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Considerations when designing a

measurement campaign
Oil and gas companies seeking to accurately quantify their methane emissions should
conduct bottom-up measurements and integrate these findings with top-down, site-
level methane emissions measurements to derive corporate inventories. This approach is
well-documented in numerous peer-reviewed studies, including Alvarez et al 2018, which
synthesized data from over 400 site-level measurements to estimate U.S. oil and gas methane
emissions.

There are three fundamental steps to consider when designing an accurate, unbiased
measurement-based methane emissions inventory: site selection, sample size definition, and
continuous improvement.

Select representative, unbiased sites for measurement.

It is critical that site selection for measurements avoids bias, which can lead to non-
representative data. Additionally, it is essential that the sample of sites selected are verifiably
representative of the population of assets. For example, if a vehicle is used to survey roads for
methane plumes and then only quantifies sites with detected plumes, emissions data will
be biased high because sampling omits sites below the survey detection limit. Conversely,
emissions data will be biased low if measurements include only well-functioning sites,
excluding those with anomalous conditions. Representative sampling considers all sites for
potential measurement and is kept unbiased by making measurements as randomly as
possible, though stratified random sampling approaches can help to increase accuracy while
reducing cost.

For companies with relatively homogenous assets, such as a standard pad or facility design
in one region, non-stratified random sampling may be sufficient to deliver the average site-
level emission rate if no parameters have a statistically significant effect on emission rates.
However, most companies have diverse assets such as both onshore and offshore sites or
wells across multiple basins with a wide range of production rates, site designs, and other
characteristics that impact site-level emission rates. For companies with more diverse assets,
stratified measurement plans guided by statistics will be necessary to obtain representative
measurement data from a select subset of assets. As a company assesses its portfolio to
develop a sampling plan, it can divide the population of its assets into like groups with shared
attributes, thus building a stratified sample. For example, different asset types — such as
production facilities and processing plants — should be measured separately since variable
throughput and on-site equipment can result in divergent average emission rates. Sites of
the same asset types may be advantageously divided into like-groups using quantitative
parameters, such as gas production, which can potentially affect emissions.

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When selecting sites for an unbiased measurement plan, companies should examine other
existing data, such as operations information, to determine if there are clear patterns that
can inform the division of assets into like-groups/categories. If assets are diverse but data are
lacking patterns, companies may start by collecting broad, preliminary data – including that
already collected from bottom-up inventories – to assess possible options for categories of
sites before commencing a full measurement study.

Determine the optimal sample size and manage uncertainty.

The optimal sample size for a measurement program is determined by the total number
of sites and variation within the population. In general, the larger the sample size and the
higher the frequency of measurements, the smaller the uncertainty of the results within a
category of sites.

With limited measurements, it is more likely that a few measurements at the extreme ends
of the distribution will cause the average to deviate. Emission rate distributions typically
have a highly positive skew, which results in a relatively small number of high emitting sites
accounting for the majority of emissions. As a consequence, estimates based on a limited
sample of measurements can bias low, since they likely exclude these highest emitting sites.
The most effective approach to managing accuracy is to use what is already known to stratify
the sampling and reduce uncertainty by increasing sample size.

There are statistical techniques for estimating uncertainty based on sample size and the
shape of distributions. Companies should define an acceptable level of uncertainty for their
emission estimates, such as a 95% confidence interval of ±30% (there is a 95% chance the
actual emissions are between 30% lower and 30% higher than the reported value). Once
an acceptable confidence interval is defined, given the company’s unique operating profile,
the company can work with in-house or third-party statisticians to determine the minimum
number of samples needed to obtain emission estimates for a particular category of sites or
for all sites within this uncertainty range.

Establish a cycle for continuous improvement.

The development of a methane emissions inventory is not a static exercise. Adjustments to

site selection and sample size — as well as changes in the portfolio from acquisitions, mergers
and divestments — can influence the accuracy and uncertainty level of measurement results.
Companies should strive to continuously improve these inventories by establishing a protocol
to review and assess the efficacy, accuracy, and coverage of completed measurement

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programs; identify areas for improvement and enhancement; and, establish clear actions
with designated owners for future measurements.

An additional benefit of measurement-derived methane emissions inventories is that they

can be leveraged for advanced analytics and preventative maintenance, as well as enable
greater comparison to independent datasets for verification and improvement, such as
developing spatially-explicit inventories that can compare emission estimates from specific
geographies. Deviations between datasets are to be expected; however, egregious divergence
may indicate potential flaws in the existing sampling approach. Companies should define
a process for multi-spatial, multi-temporal, multi-source data comparison to validate the
accuracy of emissions estimates and identify areas for improvement.

Conclusion
Today, the oil and gas industry estimates methane emissions through bottom-up emissions
factor-based approaches that primarily rely on desktop calculations. As a result, publicly
available emissions reports are restricted to estimates that provide little or no direct
measurement data. The emission factors used to estimate emissions may include underlying
measurements, but these data can be limited with respect to sample size, applicability to
current systems, and from different regions and/or operators that make it unrepresentative of
current emissions.

Without fundamental changes to how

emission inventories are developed, investors,
policymakers, regulators and civil society
lack the verifiable emissions data necessary
to corroborate industry figures or inform key
decisions about future energy systems.

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In general, the
larger the sample
size and the higher
the frequency of
measurements, the
smaller the uncertainty
of the results.

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Part 2: Shifting from

‘tell’ to ‘show’
disclosure: improved
reporting to drive
credibility

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Key Recommendations

Disclose transparent and replicable Release summary findings

methods for direct measurement, from third-party audits of
including methods for determining methane emissions data.
the representative sample.

Publish a methane emissions

inventory by region, country
and/or basin.

Methane emissions from oil and gas operations are an urgent and material business risk. Over
the last five years, there has been a meaningful increase in corporate disclosure on some
facets of methane emissions management. Enhanced industry sharing of emissions data and
mitigation programs is a critical mechanism to garner investor and public confidence. In 2016,
when EDF published its first report on methane disclosure in the oil and gas industry, Rising
Risk, zero of the 65 companies surveyed reported an individual, quantitative, time-bound
methane reduction target. Five companies had committed to a shared target through the
ONE Future initiative. Today, at least 25 companies have committed to some form a methane
reduction target – either individually or through voluntary industry coalitions – accounting for
nearly 40% of global oil and gas production.

Moving forward, for industry to earn credibility with external stakeholders through methane
emissions disclosure, the soundness of methods, the care with which they are applied, and the
accuracy of the data they produce are all essential.

The recommendations below build on existing best practices and standards of disclosure for
corporate target setting established by the investment community, including from the Task
Force on Climate-related Financial Disclosures (TCFD) as well as voluntary efforts by industry,
including in the Methane Guiding Principles. For example, signatories to the Methane Guiding
Principles – a voluntary multi-stakeholder initiative to reduce methane emissions from the
global oil and gas value chain – commit to “Increased transparency” by providing “information
in relevant external reports on methane emissions data, methodologies used to derive these
data, and progress and challenges in methane management.”

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At the same time, the TCFD recommends that companies “disclose the metrics and targets
used to assess and manage relevant climate-related risks and opportunities where such
information is material” as well as describing “performance against targets.”4

Spotlight: Regulatory Reporting

Although the principal focus of this paper is reporting. In the coming years, companies and
voluntary reporting by companies and industry coalitions’ reporting could include a combination
coalitions, we recognize the important interplay of measurement-derived top-down and bottom-
between regulatory and voluntary reporting on up methods. Illuminating both methods as
methane emissions. complementary could be a constructive phase in
the evolution of methods over time. Furthermore,
It is a longstanding practice in environmental qualitative commentary can provide important context
reporting for companies to report to governments to help the reader understand and interpret data
on a mandatory basis and to other stakeholders generated through different methods.
- such as investors - on a voluntary basis, through
channels such as sustainability reports and CDP In the medium to long-term, governments can and
filings. Government reporting requirements should develop and/or refine their reporting regimes
should be considered a mandatory minimum – a to support the shift to measurement-informed
starting point. As investor and public demand estimates. For example, the EPA has the opportunity
for information on ESG issues increases, more to further strengthen its reporting requirements by
companies are choosing to exceed government making it easier for companies to use high quality
requirements in their voluntary disclosures. direct measurement estimates to enrich accuracy
of reporting. And the European Union can build
For jurisdictions with policy and regulations its methane policy and regulatory framework
on oil and gas methane emissions, the current on a foundation of high-quality data by utilizing
mandatory reporting paradigm is generally based complementary measurement techniques at different
on component and equipment-level emissions spatial and temporal scales and progressively requiring
factors and relies on desktop calculations. reporting entities to use direct measurement to
Meanwhile, numerous geographies with buttress the accuracy and credibility of regulatory
significant oil and gas activity lack a methane reporting as part of doing business with EU natural gas
regulatory framework, such that voluntary buyers.
reporting is the sole mechanism for industry
disclosure on methane performance. Further, because the success of any performance-based
standard depends on accurate performance data, any
In the short term, companies and coalitions have jurisdiction pursuing a performance-based approach
the opportunity to adopt new methods that must attach a heightened importance to data quality
improve data quality, and show leadership in in reporting, including valid methods that utilize direct
implementing and disclosing through voluntary measurement of methane emissions.

1
See Environ. Sci. Technol. 2015, 49, 5, 3252-3261 and Environ. Sci. Technol. 2015, 49, 8, 5161-5169
2
See Science. 2018, 361, 6398, 186-188; PNAS. 2015, 112, 51, 15597-15602; Geophysical Research Letters. 2019, 46, 22, 13564-13573; Environ Sci.
Technol. 2017, 51, 21, 13008-13017.
4
Ceres, Environmental Defense Fund, Principles for Responsible Investment. 2018. Setting the Bar: Implementing the TCFD Recommendations for Oil and
Gas Methane Disclosure. https://www.unpri.org/download?ac=5586

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Moving forward, for industry to

earn credibility with external
stakeholders through methane
emissions disclosure, the
soundness of methods, the care
with which they are applied, and
the accuracy of the data they
produce are all essential.

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Recommendations for enhanced

methane disclosure
Critical path information
As companies incorporate methane emissions estimates derived from multi-spatial direct
measurements into their inventories, corporate disclosure on methane emissions will have to
evolve to reflect this addition. While companies will continue to disclose commonly reported
information, such as methane intensity and absolute methane emissions, companies should
publish critical facets of their methods and measurements to create the assurance necessary
that the figures are representative and accurate.

Methods
The methods used for a multi-spatial measurement campaign and the development of the
affiliated emissions inventory will vary by company. Regardless of the variation in methods,
three principles must hold: transparency, replicability and accuracy.

Transparency: Enhanced qualitative and quantitative detail is critical to improve trust in, and
acceptance of, the underlying process.

Replicability: In order to demonstrate the integrity of the measurement process from year to
year, companies will need to provide sufficient detail into their methods such that another
company could replicate the approach for their own assets. Replicability of an approach is an
important mechanism for instilling confidence in the methods used for estimating methane
emissions.

Accuracy: While uncertainty is an inherent component of emissions estimations, it must be

publicly acknowledged and managed by disclosing affiliated uncertainty ranges alongside
estimates.

In reporting measurement methods, companies should:

• Cite the procedure(s) adopted for the measurement program.

As noted in the section above on Methods, there are various approaches companies can
implement to conduct emissions measurement surveys. Disclosure on methane emissions
calculations that incorporate bottom-up and top-down measurements should include a

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note on which approaches were utilized. While this disclosure is qualitative in nature, it
should point investors and other interested parties to the scientific methods for greater
research and understanding.

• Describe the process for developing a corporate-wide sampling plan for direct
measurement.
As representativeness and sample size are key to an accurate, unbiased sampling process,
companies should provide a description of the exercise undertaken as well as the
outcomes of this exercise. This information should include:

• The approach used to develop the sample plan.

• A description of the asset groups that facilities are divided into, where a stratified.
random sampling approach is taken.
• The absolute number of sites selected for measurement.
• The number of measurements taken.

• Disclose the technology(s) deployed and affiliated uncertainty of the

measurement results.
There are several common modalities for methane emissions measurements. Each of
these technologies has unique strengths and limitations that can both enhance, and
impede, the accuracy of the measurements. All solutions come with uncertainty, which
must be acknowledged by external stakeholders. For example, the range of uncertainty
for some of today’s conventional emissions factors can be +/- 1000%.5 An analysis of the
site-level quantification approach Other Test Methods 33a estimates an uncertainty of
+/- 70%, with a small low bias.6 This means that for individual measurements, OTM33A
has relatively high uncertainty with a 95% confidence that actual emissions are no more
than 70% lower or 70% higher than reported, but for a group of measurements, average
reported emissions are slightly underestimated. Meanwhile, the technologies commonly
deployed for top-down measurements continue to mature. Several recent and ongoing
studies have empirically tested the uncertainty of quantification approaches.7 The
results of different technical approaches will have various levels of uncertainty. Therefore,
disclosure on technologies and uncertainty should include:

• The technology(s) used for measurement.

• The % uncertainty affiliated with the measurement instrument.

5
United States Environmental Protection Agency. Methane Emissions from the Oil and Natural Gas Industry. https://www.epa.gov/natural-gas-star-program/
methane-emissions-natural-gas-industry
6
Edie, R., Robertson, A. M., Field, R. A., Soltis, J., Snare, D. A., Zimmerle, D., Bell, C. S., Vaughn, T. L., and Murphy, S. M.: Constraining the Accuracy of Flux
Estimates Using OTM 33A, Atmos. Meas. Tech. Discuss., https://doi.org/10.5194/amt-2019-306, in review, 2019.
7
See Atmos. Chem. Phys., 2018, 18, 15145-15168; Atmos. Meas. Tech., 2017, 10, 3345-3358; Elem. Sci. Anth., 2019, 7, 1, p.37.

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Emissions inventory
Today, corporate-level emissions data are typically disclosed as a single, global, numerical
figure: absolute emissions, methane intensity figure, or both. For example, The Oil and Gas
Climate Initiative (OGCI) 2019 Annual Report states that the collective methane intensity
of the 13 OGCI member companies is “0.29% from a 2017 baseline of 0.32%.8” Similarly, in
the BP 2018 Sustainability Report the company states that they have achieved a methane
intensity of 0.20%.9

Today, investors and other external stakeholders are unable to verify these reported figures,
nor can they assess performance on a regional basis. In some instances, measured emissions
are approximately five times higher than reported figures.10 As expected, this kind of data
disconnect contributes to skepticism and uncertainty in the accuracy of emissions (and
reductions) claims and limits the public’s ability to assess corporate performance and risk.
Going forward, reporting based on measurements from a representative sample can help
deliver the additional granularity necessary to enhance the credibility of methane reporting.
Enhanced reporting should include a breakdown of emissions data to an appropriate level
of specificity that can be reasonably assessed for quality and accuracy by investors, third
party auditors, and public stakeholders. This can include:

• Methane emissions AND methane intensity broken out by region, country and/or basin

Audit report
As explored in the next chapter, credible progress towards a methane target — and the
underpinning data — should be verified by an independent and technically qualified third-
party auditor. Auditors commonly deliver a detailed audit report to their clients, as well as a
summary of the findings and recommendations. Companies that undertake audits of their
methane data should publish the auditor’s summary report to increase the confidence in,
and credibility of, the methods and calculations behind reported emissions figures.

8
Oil and Gas Climate Initiative. Scaling Up Action: Aiming for Net Zero. 2019. Page 5. https://oilandgasclimateinitiative.com/wp-content/uploads/2019/10/
OGCI-Annual-Report-2019.pdf
9
BP. Sustainability Report 2018. 2018. Page 10. https://www.bp.com/content/dam/bp/business-sites/en/global/corporate/pdfs/sustainability/group-reports/
bp-sustainability-report-2018.pdf
10
Z. R. Barkley, K. J. Davis, S. Feng, N. Balashov, A. Fried, J. DiGangi, Y. Choi and H. S. Halliday, Forward Modeling and Optimization of Methane Emissions in
the South Central United States Using Aircraft Transects Across Frontal Boundaries, Geophysical Research Letters, 46, 22, (13564-13573), (2019).

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Implementation of enhanced disclosure

Companies should continue to report progress against their methane target publicly
through either corporate annual reports or sustainability reports. Disclosure to third
party ESG platforms such as the Carbon Disclosure Project (CDP) can also be a valuable
resource for stakeholders looking for additional, centralized information related to methane
management.

In general, methane emissions reporting benefits from the inclusion of a descriptive,

qualitative narrative. This could highlight major successes (and affiliated emissions-reduction
results), examples of best practice implementation (e.g. percentage of sites monitored
on a quarterly or more frequent basis) or external factors that may influence emissions
reductions, such as asset acquisitions or sales. The narrative structure allows stakeholders
a better understanding of a company’s methane management, as well as important
contextual points to interpret the quantitative metrics.

The integration of increased measurements into emissions estimations and inventories

will take time. Even as companies embark on the transition to a direct-measurement
informed approach, stakeholders will be interested in what steps have been taken to date.
Starting at the beginning of this transition, companies can disclose information to highlight
incremental progress towards a fully realized program. This may include, but is not limited
to:

• For companies that do not estimate emissions derived from measurements, discussing
plans to do so in the future.
• Providing operational and technical insights into how the company is proactively
expanding its multi-spatial measurement program.
• Findings and learnings from initial, limited direct measurements at several types of
sites
• Outlining strategies or governance changes to drive improvements in emissions
measurements.

The additional information and insights disclosed will offer stakeholders — for the first time
— the ability to validate the accuracy of reported figures. Companies can increase assurance
regarding data quality and accuracy by having this information assessed by independent,
third-party auditors that have the expertise to sufficiently appraise this information and
assure the public about its trustworthiness.

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Part 3: Delivering
data & methods
assurance through
external auditing

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Key Recommendations

Hire an external, independent Engage in multi-stakeholder

auditor with expertise in the dialogue with auditing firms,
industry and sufficient technical industry, academics and non-
knowledge of oil and gas governmental organizations to
methane emissions to verify define a standard, recognized
methane data and methods. approach to methane
emissions auditing.

Following the wave of methane target setting over the last three years, companies are
beginning to report on their progress. This reporting is meant to instill public confidence that
the company is on track to reach its goal. This raises the question: Will stakeholders trust the
methane data provided by an oil and gas company?

Current public perception of the oil and gas industry paints a skeptical picture. A recent
survey found that only 37% of the public trusts the oil and gas industry “to do the right
thing” — including reducing methane emissions.11 Facing decreasing levels of public trust,
companies that are serious about their methane targets must take additional steps to ensure
the validity and credibility of their publicly reported methane emissions data.

Companies should obtain external, independent audits (also referred to as assurances,

verifications, or validations) of all publicly available methane data, calculations, and
methodologies and publish the summary findings of these audits on an annual basis.

Benefits of external auditing

Auditing has been common practice in financial reporting for decades. Furthermore, reports
that are validated by an external party are considered more valuable by stakeholders.12 As
sustainability reporting grows, external auditing is widely viewed as the most significant
value-add to a company’s reporting on sustainability metrics.

11
Houston Chronicle. The oil and gas industry has a problem – and the industry knows it. May 12 2017. https://www.houstonchronicle.com/business/article/
The-oil-and-gas-industry-has-a-problem-and-the-11143381.php
12
Global Reporting Initiative. The External Assurance of Sustainability Reporting. 2013.

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Companies that submit their methane data for external audit may realize a variety of
benefits, both internal and external, including:

• Increased credibility of reported data.

External audits can give stakeholders greater confidence in the information provided,
in so much as the auditing process creates greater assurance that the data and
methodologies have been thoroughly vetted. Done right, companies that externally
audit corporate methane performance can build trust in their data and methods among
investors, partners, and the public.

• Demonstrated commitment to sustainability.

The oil and gas industry is confronted with a growing crisis of confidence among the
public regarding its role in the energy transition. A recent survey found that over 70% of
the public believes that corporations should have to prove their climate change claims
through independent parties.13 Rigorous external validation of emissions performance is
an important investment towards a company’s social license to operate.

• Improved corporate value.

Studies show companies that validate sustainability reports face lower costs of capital and
commonly yield higher returns.14 Rating agencies are beginning to incorporate external
assurance practices into company scores15. Meanwhile, almost 70% of portfolio managers
indicate that sustainability reporting should be backed by third-party validation.16

Considerations for an impactful external audit

Once a company decides to validate its methane reporting, it will need to select an auditor.
While external auditing can be provided by a variety of organizations, almost 90% of
assurance statements are provided by three provider types:17

• Accountancy firms (40%): KPMG, Ernst & Young, PricewaterhouseCoopers,

Deloitte, and others.
• Certification bodies (25%): Organizations providing certification and
risk advisory services.

13
Corporate Register. Assure View: The CSR Assurance Statement Report. 2008.
14
Casey, Ph.D., Ryan J, and Jonathan H Grenier, Ph.D. “Save Money by Having Your Sustainability Report Assured.” Journal of Accountancy, 11 Apr. 2018,
www.journalofaccountancy.com/news/2018/apr/sustainability-report-assurance-services-201815361.html.
15
The Road Ahead: The KPMG Survey of Corporate Responsibility Reporting 2017. KPMG, 2017.
16
CPAs. The Preferred Choice for Assurance of Sustainability Information. AICPA, 2018.
17
Corporate Register. Assure View: The CSR Assurance Statement Report. 2008.

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• Specialist consultancies (24%): Subject matter experts such as environmental/

sustainability consultants.

There are existing process and procedure standards that govern financial auditing. However,
these standards have not transferred comprehensively and globally to sustainability
auditing. Instead, many auditors follow their own internal processes. Regardless of the
approach, the final audit report should include two essential components:

• Publish the results of the audit.

The strength of the audit hinges on the ability of external stakeholders to trust the
integrity of the audit process. If stakeholders cannot access the findings of an audit,
including an assessment of the integrity, accuracy and credible application of the
methods used to obtain the data, there is little reason to have confidence in the reporting.

• Disclose the auditing methodology.

Confidence in an audit is influenced by transparency regarding how the audit was
conducted. Auditors should provide clear, explanatory steps that detail how emissions
data and methods were assessed, and what factors led to the final conclusion.

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Spotlight: The Oil and Gas

Climate Initiative

The Oil and Gas Climate Initiative (OGCI) is a Furthermore, since 2019 OGCI took the positive
voluntary industry effort consisting of 13 oil and step of enlisting the services of an independent
gas companies representing roughly one-third of international accounting and auditing firm, Ernst
the world’s oil and gas market share. In 2018, OGCI & Young, to perform a review of the individual and
took the positive step of publicly committing to aggregated data reported.
achieve a methane intensity target of 0.25% for its
members by 2025, with an aspiration of 0.20%. However, the work of the firm is limited by existing
international auditing standards. Going forward,
As a self-styled leadership group, OGCI has the OGCI can increase the credibility of its reporting
opportunity – and the obligation – to push the by having each member company execute a data
frontier of continuously improving data quality as review by an established, independent third-party
its members address their emissions and report auditor.
on their results.
OGCI has an important role to play in solving the
global methane challenge. OGCI must accelerate
The credibility of OGCI’s efforts to reduce methane emissions at scale, on a
methane target implementation credible pathway to meeting its target by 2025 or
earlier. To earn stakeholder confidence in OGCI’s
fundamentally depends on the reported methane numbers, OGCI must:
quality of the methods, accuracy
of the data, and robustness of the • Support and adopt methods that incorporate
multi-spatial direct measurement to improve
transparency. data quality.

In 2019, OGCI stated that its collective methane • Greatly enhance disclosure, including but not
intensity dropped from 0.32% to 0.29%. However, limited to: disaggregating its top-line figure,
in addition to lacking the publication of any disclosing the proportion of data coming from
disaggregation at the company or geographic direct measurement, committing to expand the
level, the OGCI number is predominantly based use of direct measurement, and providing a much
on traditional bottom-up, emission factor-derived more comprehensive view of the mitigation and
estimations known to often understate actual monitoring activities undertaken by members.
methane emissions. It is not apparent from OGCI • Ensuring an independent and technically qualified
reporting the extent to which data is derived from third-party auditor is in place in all member
direct measurement as part of the estimation and companies to get the highest possible assurance
reporting process, let alone sufficient emissions statement at company level and increase the
measurement to inspire confidence in the reliability of information at the aggregated level.
reported numbers.

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Opportunities to improve methane auditing

While the benefits of transparent auditing are known, the ecosystem of standards and
practices for high-integrity, third-party methane emissions auditing is a nascent space. This
presents both market opportunities and implementation challenges. Without commonly
recognized methods for conducting a methane audit, there is a risk that companies will
undergo reviews with vastly different approaches. In this instance, no two audits can be
sufficiently compared – creating additional and avoidable uncertainty for already skeptical
stakeholders.

Herein lies an opportunity for industry, accounting and auditing firms, academics, and non-
governmental organizations to work together to define standards for methane auditing
excellence that can be leveraged by existing and future third-party auditors meeting the
increasing demand for credible methane verification services.

While there are many questions that must be answered on the pathway to designing a
methane auditing standard, critical initial questions for discussion include:

What is the minimum subject What technologies and

matter expertise required to independent datasets can
conduct a credible audit of an auditor use to validate a
methane emissions data and company’s reported methane
methods? emissions?

What are the methods for a third- How can leading academics
party auditor to assess both the and other experts best support
integrity of the methods and the and engage with the auditor
accuracy of the reported figures? community to support scientific
soundness in auditing methods?
What is the role and approach of
auditors conducting or supporting
independent measurements as an
added layer of verification?

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Part 4: The path to

enhanced data quality
and verification

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Key Recommendations

Ensure the right people are secured Plan ahead for additional data
and supported to enable an effective acquisition and management.
implementation.

Integrate implementation into

existing processes and protocols.

Implementation of the recommendations in this paper for enhanced methods, disclosure and
auditing for methane emissions may take six months to several years, depending on company
size and geographic footprint, and will require committed resources – including designated
staff time and capital for technology, services, or both. While each company may take a
different approach to incorporating measurements into emissions inventories, all companies
can start by answering strategic questions about their people, processes and tools to support
the integration of this new way of working into existing protocols.

People

Are leaders at the corporate level Who are the right people (by role,
and in the business prepared to function, geography) to participate
unlock resources to fully support in a program working group that
implementation? can support a successful,
coordinated roll-out?
Who is best equipped to
champion and coordinate this How can the company access qualified
effort, recognizing the multi- experts –internally and/or externally
stakeholder, multi-function, and – to deliver key facets of the program
multi-geographic nature of this design related to measurement
program? technology, statistical sampling, and
environmental reporting?

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Process

What project management What is the timeline from initiation to

systems and process protocols are complete integration into the annual
in place that can be leveraged to reporting cycle?
support implementation?
How can newly collected data enhance
How will this program be and inform ground level methane
memorialized as an official, mitigation strategies?
standard work practice and what
must be done to coordinate the
execution of this document?

What is the budget for an initial

phase of bottom-up and top-down
measurements?

Tools

Where is the existing emissions Where will the measurement data live?
data and information collected How can it be integrated into existing
and how can this be centralized to systems to increase efficiency?
inform a representative sampling
approach? Does the company have a program in
place to consider new innovations in
What technologies are used to monitoring and measurement that
measure and quantify methane can improve accuracy, reduce cost and
emissions today at various spatial drive continuous improvement?
and temporal levels? Are there
solution(s) already preferred for this
program?

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Illustrative implementation roadmap

M O N T H 0 -3 MONTH 3-8

Develop project Assess available peer- Select method Select technology(s)

implementation reviewed methods for for conducting for measurement
plan. site-level emissions multi-spatial campaign.
quantification. measurements.
Collect relevant
emissions and Assess available Define
operations data. technologies for top- measurement
down and bottom-up sample size and
measurements. select sites.

MONTH 8-16 MONTH 16-18

Conduct Incorporate uncertainty Prepare spatially Draft qualitative

multi-spatial ranges into total explicit emissions narrative for corporate
measurements at emissions estimates. inventory for public reporting.
selected facilities. reporting.

Extrapolate Submit data and

measurements methods to third-
to full population party auditor.
of assets for
total emissions
estimates.

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Defense Fund

February 2020