A Deeper Dive into the Carbon Credit Business for Plugging Orphan and Abandoned Oil and Gas Wells

The carbon credit business has three major elements, all of which can be quite confusing. However, there are definite benefits to finding a way to generate, buy, and sell carbon credits, so it is worthwhile to clarify each of the processes.?

Thankfully, the recent publication of widely respected methodologies (one from American Carbon Registry and one from CarbonPath) for carbon credits for plugging orphan and abandoned wells is a huge step forward.

Another huge step forward is the existence of independent third party measuring and calculating firms that can validate the greenhouse gas measurements and the ferreting out of specious “avoidance” credits which have to do with hypothetical scenarios (“I won’t convert this rainforest to a cattle ranch in exchange for 10 million carbon credits, etc.”).

What Is a Carbon Credit?

One carbon credit is a certificate of the removal of one metric ton of CO2?equivalent emissions. There are 0.550 kg CO2 per cubic foot of natural gas. So, an mcf is equivalent to 55 kg of CO2.?One metric ton of CO2 is equivalent to 18.18 mcf of natural gas, and so you would need to remove or stop emitting 18.18 mcf of natural gas.

There is a difference between the CO2 equivalent of natural gas in the ground or that which is flowing into the atmosphere. Some methodologies account for the fact that once it’s in the atmosphere, methane is many times more powerful than CO2 as a greenhouse gas.

Calculating Carbon Credits for Plugging Abandoned or Orphan Wells

Measurements

Several calculations need to be made by a verified, qualified independent company that specializes in accurately measuring fugitive gas emissions. They can use the following tools and techniques:

·????????????????OGI (optical gas imaging) to determine the presence of leaking methane or CO2

·????????????????Use drone-mounted IR sensors to identify all leaks (even potentially overlooked ones)

·????????????????Trap the fugitive gas in a container which allows for the direct measurement of the volume and the parts per million of gas (Earthview.io is one, and VentMeter is another), or measure at the wellhead

·????????????????Use a state of the art infrared video camera such as the Teledyne FLIR Scout 320 to measure plumes over a specific field of vision. The 3D images allow the determination of volume of flow from multiple leaks, and it can also determine the concentration in parts per million. Gaussian plume models can be used to quantify the total amount of leakage over time.??

Calculations Using Validated Methodologies

Once the independent third party has made the measurements using validated tools and approaches, the company can register the projects with independent third party organizations that possess validated methodologies for the calculation of carbon credits.

American Carbon Registry: Used by entities such as the Well Done Foundation specialized in plugging challenging orphan wells, the American Carbon Registry (ACR) has recently published its final, validated methodology for calculating credits for orphan wells. https://welldonefoundation.org/wp-content/uploads/2023/05/ACR-OOG-v1.0.pdf

Orphan well plugging carbon credit calculations cover 10 years, with an option to renew for another 10 years, making a 20-year span of removing carbon emissions into the atmosphere.

CarbonPath:?Used by both plugging companies and operators that are plugging uneconomic wells such as Kraken Resources (working in the Bakken), CarbonPath has published methodologies for orphan, idle, and abandoned wells.?Abandoned are deemed to be those that have not produced in the last six months.

Abandoned well plugging carbon credit calculations cover a 5-year span.

As a reminder, an abandoned well is one that has a known, solvent operator, and no production in the last six months. An orphan well is often a liability of the state because it does not have a solvent operator. It is often one that was poorly plugged or not plugged at all.

Carbon Registries:?

Carbon registries will hold the certificates once issued. Carbon registries assign a serial number and record ownership.?Sometimes the certificates are issued as “smart contracts” which mean that they take place in Web3, which accommodates smart contracts in a blockchain, and which can be traded using tokens.

Carbon registries must adhere to International Carbon Reduction and Offsetting Accreditation (ICROA) standards. They make sure that the carbon removed in a registered project is:

·????????????????Real

·????????????????Additional (carbon removed is over background)

·????????????????Verifiable (independent third parties)

·????????????????Permanent (can’t reverse the action of removing carbon)

CarbonPath has made the process of registering a project, calculating the quantity of carbon credits, and then tokenizing them by incorporating Celo’s blockchain ecosystem which incorporates an Ethereum Virtual Machine.??

Having your certificates as smart contracts in a blockchain ecosystem provides you with the advantage of being able to buy, sell, or trade carbon credits without using an outside broker, and without having to register your certificates as a security.

Carbon registries include

·????????????????American Carbon Registry (ACR)

·????????????????CarbonPath

·????????????????Verra

·????????????????Climate Action Reserve

·????????????????Clean Development Mechanism (Europe)

Selling Your Carbon Credits

You may wish to sell your carbon credits to aggregators or funds, or you may wish to market directly to companies that have made it a goal to achieve net zero status by a certain year, such as 2030.

Funds.

Funds such as ZeroSix (https://www.zerosix.co/) will purchase the carbon credits generated from approved projects which they will then list on their platform. They will then allow people to buy and retire carbon credits from your projects. They have a special outreach for oil and gas operations, which targets small, low-volume oil and gas wells. Rather than plugging the wells, it would be interesting to monetize the carbon reductions from implementing measurable improvements such as eliminating flaring.?Eliminating flaring, while still allowing for the clean production of oil and gas could be considered an ideal strategy, particularly in situations where natural gas production is viewed as an important bridge to avoid energy poverty.

Carbon Offsets.

This will take a bit of marketing, but could ultimately be more satisfying because the impacts are local, and also because you may get a better price than having an aggregator or huge fund buy your credits.

The Case of SpeediMart

You can even work with a local company to help them achieve carbon neutrality, which will save them money and create goodwill with the community and their stakeholders.

SpeediMart is a chain of convenience stores found in 3 states. They have a total of 45 convenience stores, which emphasize convenience, safety, and providing nutritious options in “food deserts.” In addition to gas pumps, they offer air pumps for bicycles and charging stations for scooters and other electric vehicles. SpeediMart has 2 warehouses and a central SpeediMart Kitchen.

To work with SpeediMart, you’ll have to help SpeediMart develop a Carbon Audit, and a continuous carbon monitoring calculator. They will need to start making sure that they account for all the carbon usage, and that they align with Environmental Protection Agency (EPA) guidelines.

They can make changes on their own (adding solar panels, streamlining routes, changing lighting systems, updating HVAC units). At the end of the day / month, you can sell them Carbon Credits that will make them neutral.

Why would they choose your project rather than a tree farm in California? This is where you can create a compelling case with photos of the positive impact on the environment and also on the local communities. You can also showcase working with local, often underserved communities and also how your project makes life better for children and the elderly.

Concluding Thoughts

By thoughtfully considering new projects that will plug old wells using the highest possible standards, you may be able to take advantage of expanding opportunities. Thinking ahead and being flexible is critical. If carbon taxes become a reality, you will be in a good position to survive the changes. If energy poverty reaches the point that new drilling needs to be done, or waterfloods are needed in old fields, you will have helped make that happen more quickly by eliminating unplugged, orphan wells in the middle of the project. Finally, you will have the chance to be creative and work collaboratively with companies in other industries to forge new partnerships and thrive together.

REFERENCES

American Carbon Registry. (2023). Methodology. https://welldonefoundation.org/wp-content/uploads/2023/05/ACR-OOG-v1.0.pdf

?

BP (2023).?BP Low-Carbon Trading. https://www.bp.com/en/global/bp-trading-and-shipping/what-we-do/low-carbon-trading.html

?

CarbonPath. (2023) https://www.carbonpath.io and?https://carbon-path-production.s3.us-east-2.amazonaws.com/CarbonPath+Lite+Paper+v0.pdf

?

Environmental Protection Agency (2023). Greenhouse gases equivalency calculator. https://www.epa.gov/energy/greenhouse-gases-equivalencies-calculator-calculations-and-references

?

Litvak, A. (2022, Jan 17). A new Pittsburgh well-plugging company and a leak detection firm tackle landscape of abandoned gas and oil wells.

?TCA Regional News

?

Rives, K. (2022, Dec 06). Path to net-zero: Companies looking for carbon offsets find market in turmoil.

SNL Energy Daily Gas Report

?

ZeroSix (2023). https://www.zerosix.co/