ConocoPhillips Tops the Naughty List

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According to a new study by the Center for American Progress, or CAP, ConocoPhillips (COP +3.35%) was the top methane emitter among the over 200 oil and gas companies it reviewed. It is a dubious distinction, made worst by the fact that it is not the largest natural gas producer in the country. Instead, it ranked well ahead of top natural gas producer ExxonMobil (XOM +1.35%) as well as the nation's second-largest natural gas producer, Chesapeake Energy (CHK +0.00%). These emissions are a problem that ConocoPhillips and its emitting peers need to do a better job addressing given the sheer size of their emissions compared to the rest of the sector, as well as the costs of these emissions.

Methane emissions 101

Methane is the primary component of natural gas. It is what we use to heat homes, cook food, and generate electricity. Not only does it have a variety of useful purposes, but it is by far the cleanest-burning fossil fuel. The key word here, however, is burning. While burning natural gas is much cleaner than burning coal, unburned methane is a problem. In fact, it is 87 times more potent than carbon dioxide as a global warming pollutant. That is why it is critical to capture and burn methane instead of emitting it to the atmosphere.

Unfortunately, because methane is a gas, it is not easily contained. For example, at the well site methane can be released into the atmosphere due to a range of issues, including well venting and leaks from equipment. These leaks add up. According to CAP, in 2014 the emissions just from onshore oil and gas production in the U.S. was the equivalent of more than 48 million metric tons of carbon dioxide. For perspective, CAP likened this to running 14 coal-fired power plants for a year.

The naughty list

According to CAP, 11 oil and gas producers were responsible for nearly half of those methane emissions:

Data source: Center for American Progress.

ConocoPhillips leads the pack, which is something it has done since at least 2011. According to CAP, the company emitted 4.7 million metric tons of carbon dioxide equivalent from its U.S. onshore production alone, which is tantamount to burning 24,783 railcars of coal, or enough coal to fuel 1.3 coal-fired power plants for a full year. That is noteworthy because ConocoPhillips was only the sixth-largest natural gas producer in 2014. Though to be fair, the company has cut its methane emissions by 40% from 2013, so it is making progress.

Another noteworthy emitter was EOG Resources (EOG +2.99%). Known for being an oil producer; it ranked in fourth place despite being the fourteenth-largest natural gas producer that year. Contrast this with Devon Energy, which was the fifth-largest natural gas producer in 2014 and yet was at the bottom of the list, with less than half the methane emissions of its relatively smaller rivals.

A critical driver fueling higher emissions from companies like ConocoPhillips and EOG Resources was the location of their oil and gas wells. For example, the San Juan Basin topped the list of methane emissions per well at 227 metric tons of carbon dioxide equivalent. This location led to higher emissions for ConocoPhillips given that it is a leading producer in that basin. Meanwhile, EOG Resources produces natural gas from several areas where wells emit more than 100 metric tons of carbon dioxide equivalent per well. Contrast this with ExxonMobil and Chesapeake Energy, which are both large Appalachian Basin producers where wells only emit 41 metric tons of carbon dioxide equivalent per well.

Why this matters to shareholders

Aside from the reputational black eye, high methane emissions cost these companies money because this methane could be captured and sold to customers. By not doing enough to keep it contained, these companies are doing a disservice not only to the environment but to their bottom line. Needless to say, this is a number that investors will want to see improved in the years ahead.