Hey Williams Production look at this!

Here is an interesting ClimateWire article.
MARKETS: For natural gas producers, removing emissions leaks could become more rewarding (03/29/2010)
Joel Kirkland, E&E reporter
Offset credits tied to a Devon Energy Corp. project to retrofit natural gas equipment and eliminate methane emissions spewing from thousands of drilling sites can be valued under a new system set up by the American Carbon Registry.

The Arlington, Va.-based carbon market registry said today it approved the first U.S. carbon offset methodology for valuing methane emissions reductions in the oil and natural gas sector. The emissions project is a joint effort by the Oklahoma City independent gas producer and Washington-based Verdeo Group, which develops projects designed to cut greenhouse gases in the oil, gas and mining industries. Verdeo is backed by an asset management subsidiary of Cargill Inc.

"Our goal as an organization is to find ways to get large-scale reductions in the near term," said Mary Grady, a spokeswoman for the American Carbon Registry. "We expect this to be a large sector of emissions reductions."

Projects tied to the use of carbon dioxide for enhanced oil recovery also qualify for offsets, Grady said, noting that the American Carbon Registry is in the process of updating the science behind its protocol for those projects.

"Its highly replicable," Grady added about the gas methane reduction project. "It's very significant in that regard, in terms of numbers of offsets."

Under the methodology, gas producers can generate credits by retrofitting aging equipment used to separate gas liquids with advanced "low bleed" valves that shut off gas flows that send methane into the air.

A push to get rid of wheezy old machinery
Thousands of old pneumatic controllers attached to gas-liquids separating equipment are familiar fixtures in oil and gas country. The equipment serves a fairly limited function, but sends tons of greenhouse gas emissions into the atmosphere. The goal for offset credit developers is to expand beyond Devon and engage other U.S. gas producers to install the retrofits as a first step toward meeting any future federal mandate to slash emissions.
For its part, Devon said in a statement that this project falls under a broader corporate initiative to cut emissions and create tradable, bankable offset credits.

Verdeo Group co-founder John Savage said one reason the oil and gas sector has been less eager to take on carbon credit projects is that emissions come from single, small sources. "To get scale on a project, you need to do it across a company," Savage said.

Savage said Verdeo is in talks with other major gas companies in the hope of vastly expanding the methane emissions reduction project. These kinds of projects would allow relatively low-cost emissions reductions to enter a cap-and-trade program quickly. "These projects are readily available. They can be implemented quickly," Savage said. "They don't require a $50 a ton price on carbon to make sense, and there's potential for large volumes."

Offsets are negotiated transactions that allow companies to "offset" emissions reductions they can't make quickly by buying into clean energy projects elsewhere. Until there is a mandatory U.S. carbon trading program in place, probably run by U.S. EPA, a number of private voluntary greenhouse gas registries are in the process of piecing together methodologies for verifying the legitimacy of offset projects.

Finding markets for 'low-hanging fruit'
Offsets are a contentious piece of the cap-and-trade debate in the United States. American companies aren't significant participants in the United Nations' Clean Development Mechanism. Created under the Kyoto Protocol, CDM is the world's largest offset credit generation program that allows investors in offset projects in developing countries to then sell Certified Emission Reductions (CERs) to companies or governments in Europe, Japan and elsewhere.

The U.N. program, and the offset program envisioned by proponents in Washington, has faced critics who contend there is no clear system in place to verify and quantify greenhouse gas reductions claimed by offset project developers.

Two Senate bills, including a climate bill sponsored by Sens. John Kerry (D-Mass.) and Barbara Boxer (D-Calif.), have proposed qualifying oil and gas-related emissions reduction projects as potential offset projects.

And EPA is heading down the road toward regulating that sector. Last week, the agency proposed an expansion of its mandatory greenhouse gas reporting rule to include new monitoring requirements for carbon capture and injection sites and certain oil and gas operations.

EPA issued its final greenhouse gas reporting rule last year requiring 31 industry sectors, which cover 85 percent of total U.S. greenhouse gases, to start to collect and report emissions data.

GAO report encourages Congress to keep trading simple
On a separate note, the U.S. Government Accountability Office made public a report Friday that recommends Congress design a cap-and-trade program carefully. If policymakers choose to auction greenhouse gas allowances to industrial emitters, then they "must also make important design choices in the ares of format, participation requirements, frequency and timing, price controls and rules for reporting and monitoring."

While the report doesn't get into offsets, emissions allowances and offsets will work hand in hand to reduce the sticker shock that could come with broad emissions reduction requirements across the U.S. economy. Contracts tied to both allowances and offsets would probably trade on the same platforms and commodity exchanges.

The report, which looks at both the European Union's Emission Trading System and one in the northeastern United States, examines the upside and downside of selling allowances. Doing so would generate revenue that could either be returned to consumers or reinvested in clean-energy technology research and development.

Economists told the GAO that allowance sales should be simple and transparent; that it is critical to ensure sufficient levels of participation in allowance sales; auctions should be efficient in that they reflect the true value of allowances; and market manipulation or collusion could badly distort prices in such a market.

The report also says that if policymakers choose, they could design a program to maximize the generation of revenues. Doing so, though, could "increase the burden of a cap-and-trade program on covered entities or consumers of their products, which could erode political support for the program."