By Jim Hight, Senior Editor, Climate Change Business Journal

SoCal Gas Co’s Aliso Canyon methane leak is a disaster for the adjacent communities and a setback for California’s climate change goals, but it’s also a large potential business opportunity for some California businesses, farmers, cities and nonprofits.

On Jan. 10, Gov. Brown ordered the state Air Resources Board to develop a program to “fully mitigate” the leak’s emissions by March 31, 2016. SoCal Gas has said it will comply.

In addition to the local air pollution, the leak is a big deal because of the amount of methane escaping. In November, a UC Davis scientist flew a methane-sniffing airplane over Aliso Canyon and estimated it was spewing about 1,200 tons daily. By early January, that had added up to about 80,000 tons since the leak started Oct. 23.

As much as $40 million could fund offset projects in farms and cities

If SoCal Gas can plug the leak by late February, as it hopes, another 50,000 tons or so will have been emitted. So let’s say 130,000 tons will have been emitted by March 1. Since methane is a more potent GHG than carbon-dioxide, ARB uses the latest IPCC analyses to calculate that one ton of methane = 25 tons of CO2. So 130,000 tons equates to 3.25 million tons of CO2-equivalent emissions. At current California carbon allowance prices of $12 to $13 per CO2-e, we’re talking potential demand for $40 million worth of carbon offsets.

But SoCal Gas probably won’t be able to meet its obligations by simply buying carbon offsets. Brown instructed ARB to “prioritize” projects that reduce methane and other “short-lived climate pollutants,” such as black carbon and the F-gases used in refrigeration and industrial processes. They also must be in-state projects.

Pat Sullivan with SCS Engineers, a firm that measures, manages and reduces methane for solid waste and other industries and verifies carbon offset projects, thinks SoCal Gas will first look internally. “I expect them to propose additional methane reductions from their own operations throughout the state, such as reducing leaks from pipelines, equipment and other operations,” Sullivan told me.

But given the scale of what SoCal gas will “owe” to the atmosphere, he thinks the company will also have to look elsewhere. And for methane offsets, SoCal Gas will face what’s known as the “additionality” problem: it will have to find and fund projects that create truly additional GHG reductions, not just those required by law. “Landfills and wastewater plants are fairly well controlled in the state, so I don’t think there is much [reduction opportunity] there,” said Sullivan.

One option is funding programs to divert food scraps, green waste and other organic waste away from landfills to composting or anaerobic digestion facilities. Waste diversion is “complex and involves various parties that SoCal Gas cannot control, but they could help fund communities’ programs that are already being planned—maybe from southern California communities they serve,” said Sullivan.

But here again, additionality looms. California recently enacted new mandates for commercial organic waste producers above a certain threshold. So any entity trying to claim methane reductions from waste diversion will have to demonstrate that it is diverting “additional” waste beyond what’s now required by law.

A further consideration: ARB hasn’t issued a compliance offset protocol for organic waste diversion. The Climate Action Registry has done so, and ARB has worked closely with this outfit for years. Would ARB allow SoCal Gas to comply with the governor’s order with “voluntary” CAR offsets?

Alexander Gershenson of EcoShift Consulting points out that SoCal Gas could fund a wide range of projects that target the most common GHG: carbon-dioxide. They’d get credit for 1/25 of a ton of methane for every ton of CO2 such projects kept out of the atmosphere.

“They could do things such as funding renewable power projects or making grants to cities to establish local offset funds,” said Gershenson. “The governor could even impose a fine on them and use the money to support additional tax rebates for Californians to buy electric vehicles.”

But for this approach to work, ARB would have to determine that it’s not feasible to offset the Aliso Canyon methane burst by cutting short-lived climate pollutants only.

ARB has been working on programs for these types of gases for some time, but it’s a hugely complex task. The biggest sources of black carbon are off-road diesel engines and wood fires. Diesel emissions are trending down due to air quality regulations, but ARB and local air districts are just starting to evaluate how to reduce emissions from home-heating fires.

Reining in F-gases requires changing how refrigerators are manufactured worldwide—a big task even for California regulators.

Of the three types of gases, methane is the biggest contributor to climate change and the one for which ARB sees the biggest reduction opportunity. The agency is proposing to cut methane emissions by 65% by 2030.

As Sullivan points out, there is one type of offset project already approved by ARB that is poised to cut a lot of methane: farm projects that “capture and destroy methane from manure management systems.”

“SoCal Gas could fund digesters and methane recovery plants at dairies and chicken farms, which can be found across their territory in the San Joaquin Valley and Riverside County,” said Sullivan. “If they could turn that recovered methane into energy, even better.” These types of projects also benefit California’s rural economy and improve air quality in farming communities.

But Sullivan thinks that SoCal Gas may have trouble finding enough methane offsets to make up for its huge sustained gas leak. “They may end up negotiating with CARB over the use of reductions from other short-lived gases that would create benefits in the same time horizon as methane,” he said.

Jim Hight is a researcher, writer, editor and project manager with more than 35 years experience serving public, non-governmental and private-sector organizations. He has worked with Environmental Business International (EBI) since 1999 and edited Climate Change Business Journal since its launch in 2007.

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Republished with permission