Two things to start: US emissions plunged last year but could rise sharply if and when an economic recovery takes hold, according to Rhodium Group. In Europe, Russia’s Gazprom will this week defy US sanctions to begin laying the final parts of its controversial Nord Stream 2 natural gas pipeline to Germany.

And BP joined the list of companies announcing a halt on some political contributions saying — in the wake of the deadly riot by Trump supporters at the Capitol — that its “employee political action committee will pause all contributions for six months” and “re-evaluate its criteria for candidate support”.Our first note today is on the US’s natural gas sector, where environmental opposition to new infrastructure may have called time on one of the biggest boom stories of the shale revolution: the rise of Appalachian gas.

Our second is on methane emissions — the oil and gas industry’s dirty secret. In just over a week, a new federal administration takes power with a mandate to crack down on emissions of this potent greenhouse gas. Many operators are not prepared.

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As US natural gas production boomed over the past decade, operators in the Appalachian region in the country’s north-east led the charge. Output from the Marcellus and Utica shales soared from less than 5bn to almost 35bn cubic feet a day.

But that growth may be about to hit a ceiling. Not because of lack of demand (that is still rising). And not because of lack of supply (there is still plenty of gas to be extracted). But because an activist drive to block further infrastructure development is choking off gas producers’ route to market.

“If you look beyond 2021 . . . you’re not going to see much in the way of any material additional pipeline takeaway capacity provided to support further growth out of the Marcellus and Utica — given the political climate we find ourselves in,” said Richard Redash, head of global gas planning at S&P Global Platts.

Line chart of Production (billion cubic feet per day) showing Appalachia led the boom in US gas

Activists opposed to the growth of fossil fuels have targeted the construction of new pipelines. They point out that, as a fossil fuel, any new natural gas development will simply add emissions when the US must urgently replace them — and that falling renewables costs make new gas-fired generation unnecessary anyway.

In the US north-east, their tactics have proved strikingly effective. “What they’ve figured out is . . . they can’t beat us on the supply side and can’t beat us on the demand side,” Mike Sommers, chief executive of the American Petroleum Institute, told industry executives last September.

Last year, the Atlantic Coast Pipeline — which would have pumped 1.5 bcf/d from the region — was abandoned after repeated challenges sent costs soaring. The Mountain Valley Pipeline is the only significant project still in the offing. It is due to come online this year — but analysts reckon it could be delayed by another four years as it struggles to attain the requisite permits.

Analysts estimate there is about 2 bcf/d of output growth left in Appalachia before it hits a ceiling, given current pipeline capacity. The reckoning has been kept at bay as the chaos of the past year caused companies to hold off growth plans.

But as the industry cranks into gear elsewhere, looking to supply an expected surge in liquefied natural gas exports, operators in the Marcellus and Utica — worried about the lack of market access — are not returning to growth mode.

Those plays, said Mr Redash, now look to be “fenced off” because of the lack of new pipelines. “That’s going to put the onus on other plays to meet that incremental production.”

All of this is good news for at least one group: producers operating in the Haynesville shale of Louisiana and Texas, where they are planning for major growth.

“Haynesville is really the only other player that has gas resource to scale to replace the kind of development pace that the north-east has had over the past decade,” said Jen Snyder, a director at Enverus.

Line chart of Rig count by basin showing Haynesville operators are raring to go as Appalachian growth stalls

Southern state legislatures and regulators remain friendlier to the fossil fuel industry. Operators there are also closer to the key demand centres — industry and LNG terminals — that will drive future growth.

Even so, federal restrictions are likely to tighten under the incoming Biden administration, which plans to cut power emissions to net-zero by 2035.

Deb Haaland, the new interior secretary, has been a vocal opponent of certain pipeline projects. Would-be midstream investors — and gas operators — are wary.

As Energy Secretary Dan Brouillette said last year: “The product has no value without the ability to get it to market.” (Myles McCormick)

With less than two weeks until President-elect Joe Biden takes office, the US shale patch shows little sign that it is ready for a coming crackdown on emissions of methane, the potent greenhouse gas blamed for supercharging global warming trends.

Of 144 oil and gas operators asked in the most recent Dallas Fed survey, two-thirds had no plan to reduce methane emissions. The same share of companies had no plan to reduce gas flaring and 80 per cent didn’t even have a plan to cut carbon emissions. (More data from a similar questionnaire from the Kansas City Fed in our Endnote.)

“There is a real split between those who see what the future holds and are preparing for it and those who seem to be blind to what’s in their own best interest,” said Matt Watson, vice-president for energy at the Environmental Defense Fund.

The Dallas Fed survey came after New Mexico’s Environmental Department released emissions data showing the state’s share of the Permian Basin saw methane leak rates that more than doubled in 2020, to 5 per cent from 2 per cent a year earlier.

The regulators spotted leaks from “a variety of oil and gas equipment, including storage tanks and flares”, and said that leak rates were “significantly higher than those reported by industry”.

Total methane emissions from across the Permian, including Texas, fell sharply last year as production and drilling activity collapsed in the basin along with the oil price, but have since risen back towards pre-crisis levels, according to data from the Environmental Defense Fund’s Permian Methane Analysis Project.

Before the crisis, the group found that Permian producers were releasing methane at three times the national rate. Some 1.4m metric tonnes of methane are released from the Permian every year, enough to supply 2m homes, says EDF.

Oil and gas producers broadly welcomed the Trump administration’s light-touch regulatory approach — which included elimination of Obama-era regulations requiring stringent monitoring and repairing of methane leaks — saying self-policing would be as effective.

But New Mexico’s regulators said the data they collected cast doubt on the industry’s assertion it could arrest its own emissions. “It is clear that voluntary emissions reductions measures undertaken by some operators are not enough to solve this problem,” says James Kenney, cabinet secretary at New Mexico’s Environmental Department.

The state, one of the fastest growing areas of the Permian by production, says it plans to roll out new gas capture rules in March that would “curb 98 per cent of methane emissions from oil and gas operations”.

Last year saw a flurry of announcements focused on methane emission targets from ConocoPhillips, Occidental Petroleum and Pioneer Natural Resources, among others. ExxonMobil pledged to reduce its methane emissions per barrel produced by 40-50 per cent by 2025, although it did not promise absolute emissions reductions.

US producer equities have rallied in recent weeks on higher oil prices, but many analysts see the emissions problem scaring off investors and acting as a structural weight on the sector — especially as a new president in Washington arrives with a mandate to deal with the methane problem.

“The winners in this game are going to be the ones that respond to the call for urgent action and the losers will be those that continue to model themselves on the noble ostrich,” said Mr Watson. (Justin Jacobs)

Zero-emission electricity — including wind, solar, batteries and nuclear — will account for more than 80 per cent of new additions by capacity in the US this year, according to the Energy Information Administration. Natural gas accounts for the rest.

More than 15GW of new solar power will be added to the grid, making it the largest single source of new generating capacity, followed by wind power at 12.2GW. Wind and solar combined will account for about 70 per cent of new capacity.

New battery capacity additions of 4.3GW in 2021 will smash the record for annual deployments — almost matching new natural gas capacity additions, which will come in at about 6.6GW in 2021.

Column chart of Planned utility-scale electricity additions by capacity in 2021, GW showing US renewables to surge in 2021

The mood is picking up in second-tier US shale regions, according to a survey of operators by the Kansas City Federal Reserve. Activity is increasing too, but remains beneath the level of a year ago. Respondents from Colorado, Wyoming, Oklahoma and other areas — but not the core shale plays of Texas and New Mexico — suggested oil prices still needed to rise further, to $56 a barrel, before a “substantial” pick-up in drilling could occur. Still, those levels may be struck within a couple of years, if operators’ price expectations are correct.

Meanwhile, environmental concerns are moving more slowly through the shale patch. More than 40 per cent of respondents said their company had no plans to reduce CO2, ethane emissions or flaring, nor to recycle or reuse water.

Line chart of WTI, expected ($ per barrel) showing US oil producers