Is Blockchain the Next Step in Methane Emissions Management?

In this episode of Methane Talks, a forward-thinking podcast, Host Olivia Schurer features Paul Hajek, Chief Revenue Officer for Envana Software Solutions, and Liz Arthur, Global Head of Enterprise Strategy for EarnDLT.

Hosted by the Industrial Decarbonization Network.

Envana and EarnDLT Explain Blockchain on Methane Talks Podcast

Paul Hajek - Envana Software Solutions

Paul has dedicated his career to bridging the gap between new technology and its implementation in the oil and gas sector, driven by a passion to help this vital industry reach new heights. Paul’s career spans well control and upstream operational excellence, oil and gas software, and cleantech.  

Liz Arthur - Earn DLT

Liz Arthur's role entails helping customers and buyers achieve their ESG goals by leveraging over 18 years of experience in oil and gas and technology. Liz's roots in the industry were formed as a landman for Chesapeake Energy where she played a vital role in helping to develop the Barnett Shale. Liz is well known in the ESG community for her ability to transform markets and connect members across the industry value chain to pursue their ESG and differentiated gas goals, and her passion for building a more sustainable future.

Liz, can you walk us through what blockchain or Distributed Ledger Technology means in the context of emissions management?

Liz- Absolutely! There’s no better way to start. Sometimes I feel like blockchain is a little taboo or it's odd becoming even coming from upstream oil and gas. But I have really fallen in love with the technology over the past few years being more immersed in it. It simply means that you can digitize an immutable specific set of data that you can trace throughout its existence or life. In the space of emissions management, we're talking about methane intensity, carbon intensity, environmental attributes. That set of data is then digitized into permanent data. Transparency of course is key, but it's also about being able to trace that data set throughout the life — in this case today we're going to talk about a gas molecule —but it can be for many different compounds. You can trace that data set for the life of that molecule leveraging this technology.

Ok, it's really about building that history book essentially of data that people can refer back to for years to come.

Liz- 100%! This is really stemming from replacing what was very much a paper trail. When we talked about commercial transactions, it was, “I can't wait to do this deal with you, I'm going to send you my environmental attributes in the form of PDFs.” So, it would create risk. What if I wasn't there to send that over time? It just seemed like we needed a better digital solution. That's where blockchain steps in.

For sure, it sounds much more efficient. Paul, what's missing today in the emissions management software space that Envana is now addressing with Earn DLT? How do you put the two things together? Where did your team see the benefit or need for collaboration?

Paul- In a word, it’s transparency. There's an opportunity that exists today for oil and gas companies to add transparency to their carbon value chain. Especially in light of things like CBAM — the Carbon Border Adjustment Mechanism — which is the used tool to put a fair price on the carbon emitted during the production of carbon-intensive goods. That also encourages cleaner industrial production in non-EU countries as well. In a word, it’s about transparency. What we're providing on the Envana side is critical value chain information about your greenhouse gas inventory and doing that in an optimal environment — an environment that centralized, that's governable, and helps people work in a trusted space where they can count on the data being reliable, also being transparent and auditable. Companies are running into regulatory requirements on the transparency front like never before. There are so many different standards, there are a million acronyms. But increasingly, they're less tolerant or unwilling to accept things like manual entries or spreadsheets as the source of truth, especially when we're talking about something as important as a quantified emissions token. Therefore, this need arises, as Liz likes to put it, for this “nutrition label” for buyers to know what they're getting in their differentiated gas. Back to the original question: what we're providing in our emissions management solution at Envana is transparency — the needed transparency across the entire value chain for this critical exchange of information.

I think it's so important that you mention that transparency piece, as it is central to everything that we discuss within the methane emission space. Whether it's on the regulatory front — particularly looking into the European space, with the new import standards… I think that's going to become far more important obviously for US operators and as well just looking into more general markets. Whether it's carbon credits, if the data isn't there and it isn't trustworthy, then how can we move forward? I think it’s key from so many different angles.  

Liz, back to you: QETs come up a lot in my reading about kind of blockchain and the work that Earn DLT does. What is QET? How does that improve the ability to market natural gas in international markets? Who are the buyers? Do you help match buyers and sellers? Essentially, what are they and how does it function in practice?

Liz- 100%! I joke I would make a hell of a matchmaker for gas or methanol or all sorts of molecules. I identify more as a market enabler. When I think about that term — coming from so far upstream and then you get down into this emissions data management space where Paul lives — it's so siloed. There definitely is an existing silo between operations and sustainability and all critical work that is being done, and as Paul said, all these regulations. Then, how do we commercialize this? How does this tie to the downstream market? The QET — the quantified emissions — it's an immutable data set. It's primary data. Paul is right: there are a lot of acronyms: We started with responsibly stored gas, certified gas, differentiated gas… The best definition now is measured, recorded, and verified primary data. That's so key as you move further downstream. It really is like a nutrition label for that gas molecule. Those ingredients come from someone like Paul. Those ingredients on the nutrition label are carbon intensity, methane intensity, greenhouse gases, and maybe some additional environmental attributes. Actual measurement.

There are three key ingredients into a QET:

• We want site-level data. So even though we report as an industry, in Subpart W, now at a basin level, we're looking for that step further that so many good leaders and companies have already moved to. We're looking for site level data.
• We want some type of advanced measurement. There are so many excellent technologies out there. We want operators and midstream companies to choose that technology that's fit for purpose, and that's also adjusted by someone like a Paul.
• The third part is the validator, which is extremely crucial to a QET. So outside of my contract, Earn assigns a third-party validator because all this data — whether it's from Paul or another company — is verifiable but not validated. There is a difference. To truly mitigate that risk for the downstream, we assign a third-party validator. This is like an SDS Global, or Spirit Environmental. What they're doing is just auditing. What is that methodology? Do we understand where that technology is coming from? Does that carbon intensity specifically need a global standard? Do we understand how this is going to fit into our downstream buyers’ life cycle analysis (LCA)? That is so critical! Measurement data. Having a validator. Production data. Other environmental attributes are present.

Liz Arthur, Earn DLT

These are the makeups of that nutrition label. Paul even brought up CBAM. We're looking on the downstream for Scope 3 reporting companies that are essentially on a carbon diet. I don't know about you, but the only time I've looked at the nutrition label is when I've been committed to counting protein or something else. If you're on a carbon diet, then you need that nutrition label. That's where we come in to enable the market with a QET.

Thank you for the explanation. I think you touched on it briefly… you mentioned how we have certified gas, differentiated gas. Now to explicitly define this, how is having a nutrition label for natural gas explicitly different from having certification?

Liz- I have much love for this entire space. The first trade differentiated gas — whatever you want to call it — only happened in 2018! That is zero years when you think about the industry. That was done by Southwestern. They really had leaned forward into getting this idea of third-party assessment which included data surrounding air. They made a trade for a premium. This space was born. That idea is that whether it's operational best practices or that data set itself, you're differentiating yourself. Now it's evolved. A nutrition label is not a grade. I'm not saying good or bad, better or worse. Verified primary data is “this is what the data is”. The transparency of the data is key. It adheres to this global standard… so whether that is leaning into the OGMP 2.0 framework or OGCI and moving down those standards through something like GRI or TFS, OCI+, RED II (Renewable Energy Directive). All of these new beautiful acronyms are so important to the downstream. Compliance to a standard with a third-party validation is different from the stamp of “you're doing great”. It's not to take away from what certified gas has been because it absolutely is great on a sustainability report. In the financial world, when it comes to PE backers, it definitely can make a difference.

But when we’re talking about decarbonization and being able to use a carbon intensity that is not a default number, you've got to move more to an MRV model. That's where we are in this space. It's evolving, there's a spectrum of buyers. It is a buyers’ world! We're here for that evolution and I think Envana certainly is as well.

Thank you! I think that evolution —when you put it into perspective — looking back to 2018, that evolution has been so rapid! Even this blockchain topic in general I really think is something that's popped up on people's radars within the last six months more so than before. It's exciting to see how rapidly it’s changing. It’s so true that we need to really dig down into that granular level of data like you said versus just an A grade or a B grade, for example. 

Going to you, Paul, obviously Liz mentioned that you're very much at the beginning of this data process. In your opinion, what's the biggest pain point in the marketplace driving the need for bespoke oil and gas software with built in blockchain QET optionality from your perspective at that beginning process?

Paul- I think I think largely there's tremendous pressure to decarbonize both from non-governmental organizations, from governmental organizations, from stakeholders, shareholders and companies. There's both internal and external pressure for this and companies are looking for a way to have great visibility into the progress that they've made there and also to make sure that their companies are benefiting, that the end user of these products is benefiting from that decarbonization effort which is something that we all want. It's an interesting space because, as Liz mentioned, things are constantly changing. That's how it is when you're on the cutting edge of technology, especially in a heavy industry like oil and gas. I think that we're in an interesting spot because what we've seen in the market is there's still a decent amount of fragmentation in the technology space for oil and gas around emissions management. What you've seen is that there are some early adopters who are probably using tools that are a bit generic. That was good enough for a while. It was good enough because it provided a level of transparency and a central repository for emissions management that maybe hadn't previously existed. Back to the theme that things constantly changing, that's already quickly being phased out. Generic HSE software, for instance, really just isn't going to cut it. That was the first evolution of technologies in this space that was there early on in the technology adoption life cycle. Now what we're seeing is that in order for people to reach these goals in the long run, especially with something that is very data-driven — such as the offering with EarnDLT — you need something that's very specific to the industry and very granular and data-driven.

We find that a lot of people are in one or two spaces: they're either using a generic emissions management software tool that maybe doesn't provide the important granular level of data and environmental attributes necessary to inform the QET or they're still doing a voluntary, sort of a manual effort. From everything from spreadsheets to scrambling to put together a sustainability report — often six months to a year after the fact. I would say that in general, what's driving this is that people have had a taste they've made progress, and the progress is good.  But then, quickly what they realize is as soon as they've made that first step, they see they have to take the next step. That's where we come in at Envana: we're providing a solution that's bespoke to the oil and gas industry. It's made for it; it's designed for it and we're able to provide a level of granularity to your GHG inventory down to the component level for all the specific and niche operational activities that you would find in this industry. That's exactly what happens to be needed to have great synergy with the offering with Earn DLT. We're seeing people get ahead of this. Customers like Halliburton are way ahead of the game. AkerBP, PETRONAS, Occlusion Solutions here in North America… They're probably at the cutting edge and they're quickly adopting it. We're seeing that shift very dramatically. It's a really exciting time. I would say that the trend in the marketplace, especially over the last year and looking ahead at the next one or two years is that environmental reporting in the oil and gas industry is moving towards a more data-driven and transparent future. Meeting those expectations, you need to carefully assess your reporting needs, and your emissions management technology and make sure that you have the right solution. I think that's really what's driving it in the marketplace. It's all the combination of there having been progress and people seeing those benefits but also recognizing that we need to continue to move into a more data-driven and transparent space and wondering how they can bridge that gap by benefiting from the great work they've done toward reducing their carbon footprint. All those things together are really what are driving people in this direction.

Absolutely. Thank you for that brilliant explanation. I think it really is data, data, data. The more granular we can get, the better. That's the progress the industry is really looking for. Whether it's something to do with constructing measurement-informed inventories that is obviously very much a growing trend within the US and something that operators are very focused on.

When we're looking towards new and cutting-edge technologies one of the first questions that will pop into people's minds is how does this affect my bottom line. How are clients’ economics impacted by adding something such as QETs or having this granular emissions data? Why does it matter in practice?

Liz- It absolutely matters. Producers are made to be driven to be more and more efficient. How can you drill better, faster, and more efficient? How can we drill better, and faster with more production? In the environmental space, so much of the work that's being done is still voluntary. Compliance is important. But if you're below that threshold the biggest thing is also getting to scale… everyone starts with a pad or a couple of pads. But to scale across an asset… If you’re in the C-suite right now you’re saying, “Wow, we now have a growing budget, we're creating a budget for sustainability but is there a return on this?” Besides “we are still existing and we are still producing and we are not getting fined” — which is ground level. The bottom line is incredibly important. This is where we have to think about our buyers again: When we think about that spectrum again, a Scope 3 reporting fires everything from really great leaders in the utility space to hydrogen producers to methanol, to ammonia producers on the chemical side and a large number of great commodity houses. We have to pull ourselves almost out of the bubble of “we produce natural gas and then we sell it and then we're done” to understand “how does natural gas as an energy source fit into someone's feedstock?” When you pull yourself back up and say “OK there's a budget and there's a carbon intensity goal. We're trying to drive that number down. What are our options?” We have RNG (renewable natural gas) — our favorite cousin — that carries a low carbon intensity but man, she's expensive! Made in small batches. We have offsets. There are all these other options. And we have natural gas. Natural gas has just been looked upon as a commodity, black and white, gas is gas. And in moves this movement that Paul and I are talking about… “well, not all gas is created differently. What if it really does carry a lower carbon intensity? When you really look at it from that perspective in terms of feedstock — if I'm bringing you a volume of gas where you can actually use it as a tool to lower that CI (carbon intensity) — guess what? That buyer is going to spend less on carbon offsets. They're going to spend less on other sources that are more expensive. And at bulk, natural gas can actually move the needle. We're seeing natural gas is a way to absolutely decarbonize. It's just not the upfront “mitigating that methane”. It's leveraging natural gas itself as a way to lower that CI. So, when a buyer is able to do that and use that lower that lower carbon intensity number, there is the delta that we really want to work backward from where a premium should come from. A low carbon intensity validated gas product is less than these other energy sources which the right buyer is happy to pay that little premium. It makes the math work. It is not paying a premium because I feel good, because I'm like “I love Envana, I love what this upstream company is doing.” It’s carbon management. It's really leaning into that price of carbon, which if you ask 50 people in a room, “What's the price of industrial carbon today?” You would get some different answers, and we recognize that. But we see the market is moving that way. And absolutely, we're already seeing that with suppliers in the market today and with buyers… that this needle is being moved. We've seen that with great examples from operators like PureWest, like Rockcliff… TTR (Trinidad and Tobago), when they have made those sales of their gas product to someone like a Proman — to a leader in the methanol space. And now the latest press release is Proman actually created their own nutrition label for methanol for Avonic on the downstream. When we watch that chain and that evolution, I know it's going to work at scale. And if it doesn't work at scale, we're all working on a great science project, not a solution.

Thank you for that, brilliant. To touch on your point about the change, because it's great, obviously, natural gas being able to move the needle, I guess one of the main arguments against that perhaps is that lack of transparency across the value chain we’ve already been touching upon here.

So Paul, going back to you, does Envana help track a report on the Scope 1-3 emissions to create that transparency? Or how does that function?

Paul- Absolutely, we do. That was one of our core design principles: to make sure that we provided a technology solution that addresses Scope 1-3. Emphasizing the point that we made earlier, if you're not doing that, you really don't have a complete picture. Taking all the upstream activities, all the downstream activities, and of course, what you're responsible for in your Scope one is your direct emissions as a reporting company. All of that is necessary to get a full picture of what's going on across the value chain. So, we designed the technology, our product, Envana Catalyst was designed from day one to address Scope1-2 and 3. The reason that matters is because we're quickly moving into a world where it's not just enough to address Scope 1. Previously, people have been content to do that and then maybe a little bit of Scope 2. You still see that. This is the type of accountability and responsibility that solutions providers in this industry have to take. Part of the reason for that is because it's difficult to track all this information. As innovators and solutions providers for this industry, we have to provide tools and technology and offering, and advisory services to help our clients reach that level of comprehensive reporting and also granular reporting at the same time. You've got to go both deep and granular with the data and wide across all three scopes. It's a bit of “chicken and the egg”. It's like you know if you wait for innovation from solution providers in the industry to solve that problem, you wait for buyers in this in this industry to push for that and invest in it. It's been a little bit of both. We've seen a tremendous proactive response from leaders in this space who really pioneered making sure that they have their granular understanding of their Scope 1 and pushing into Scope 2. Solution providers like us have responded, in kind, by creating bespoke technology offerings that can help pull our customers across all three scopes and give them the comprehensive view that they need. Otherwise, you're stuck with an incomplete picture. It's rapidly evolving. You're still going to see a lot of people in the market who are content with Scope 1 and 2. Transparently, that's a reality but that is so quickly changing. Even a little less than two years ago, you would have people say, “I don't even wanna hear about Scope 3” and that is completely changed now. That’s the new world that we're in and that's encouraging to see because we're going to make a lot of progress with that and our technology offerings complement that.

Liz, you might have something to add to that.

Liz- Yes, Scope 1, 2, 3 they're not easy! Scope 1 I just want to explain this bit and just reiterate it: My buyers (Scope 3) can directly benefit from a producer’s Scope 1. Scope 3 is the hardest of all the scopes because it's intangible. By definition, it’s double counting. So, when you think about how can a buyer possibly have control over those emissions associated with upstream production? They can take advantage of that Scope 1 when it's being driven down. Making sure that bridge across Scope 2, is probably the easiest of the scopes… we love electricity! But that bridge between Scope 1 and Scope 3 is so critical. It means not just thinking like an upstream or midstream producer, it's thinking about the buyers' Scope 3. They can take advantage of all the hard incredible work the upstream and midstream industry is doing on Scope 1. And you have to have a scalable data bridge to make that happen. And I think that's why the work that Paul does, and all our operators, our customers in the space, is so critical. It is really to help drive carbonization further down the value chain.

Absolutely. And I think Scope 3, as you touched upon, Paul, is very much looked at as going the extra mile currently. And I think there's obviously that need for a culture shift which is obviously what this technology is really about. It's about going that extra mile, going beyond compliance, like we said at the beginning of the episode.

To step back slightly as I do have to appreciate the current context that we're living in with the kind of strong regulatory requirements particularly in the US, how can using EarnDLT help compliance directly with recent regulatory changes?

Liz- It's meeting where people are. We already have this huge customer base that is having to do this to stay ahead of SubPart W 0000b. You're already doing this good work. First of all, it’s just meeting someone where they are. You're sitting on a data set. To Paul’s point, maybe it's on ten different spreadsheets. Maybe it's divided up by a number of companies. That's OK. Meeting companies where they are and saying “We recognize there's so many energy initiatives.” I just came back from a conference last week where the focus was on the California market. There are so many Senate bills. The Securities and Exchange Commission (SEC) is pushing on California. And there are some incredible operators out there. Here the state is importing a wild amount of gas and trying to figure this out. Regulations like that — we've got to just continue to do better to talk about it and be proactive on the solutions. That's really what I see in the U.S. As an example, lots of our Rockies customers are really helping to try and help drive that change for constituents in California. And Paul mentioned this earlier — we definitely see that trend in Europe. There are already those regulations where people are getting ready for the carbon diet that CBAM is bringing in 2026. So it's truly being a step ahead and recognizing we can all have strong feelings and opinions but then there's the reality of removing this direction we're already doing this work. Let's be smart about it! Let's be smart about what we're doing and take that priority of regulatory compliance and match it with commercial enablement. That's really where it's a win-win. We're helping the downstream, you're getting somewhat of a commercial return and we come become a bigger part of the picture instead of “Do you believe in ESG or not” or “Is this going to change depending on who's in office”. It just removes those it removes some of that from the conversation to “do the best you can and if you can do better we should do better.

I don't think anyone could have summarized it better than this. I think that's saying I have a step ahead playing it smart, all of that ethos is just so important within the space. Because I think there can be some kind of a sense of tiredness around the regulatory landscape and that there's a constant evolution, the constant evolvement of new regulations… operators are concerned with how they can keep up with that, how can they keep the workforce motivated. I think this sting of having to step ahead is vital.

Liz- Also with all of those issues coming through, the last thing an operator company wants to hear is someone else saying “You should do this” or “You have to do this” or “This is the way”. This space does not work that way, but it is built on partnerships. It's built on sharing, it's built on driving through solutions. I believe — whether it's Envana or Earn DLT —there are so many good companies in this space, it's a responsibility to show this is not the way but this is a way, and here's the data that proves what this looks like at scale, what this looks like in the commercial space. It's supposed to be getting optionality, not forcing someone into a certain path. I think if we lead through it with an open mind — be kind to your channel partners, have empathy for upstream and midstream — that's really the only way through.

Thanks, Liz! I think to build upon your point that you mentioned about meeting people where they are, if there's a listener right now thinking, “Well, where do I start?” “What do I expect?” What advice would you give to them?

Liz- Two things: look at your existing data, like what are you doing for Scope 1? What are you doing for Scope 3? Evaluate how many different groups in your company are tracking and chasing these numbers. But you might already be sitting on the data set you need to commercialize this. The second thing is: walk through the hallway and if you're on the sustainability team or you are on an air quality team, go ask your gas marketer “Hey, do you ever leverage this data in our deals?” Find out what midstream companies are working with. It's a very split infrastructure in the USA — a little less so in Canada… “How can this data help us?” Have those conversations, bring down those walls, and ask good questions. One of the things I try to do is get different groups in the same room because they're more than likely working towards the same goal as a company but with very different agendas and we know that we know that. That's OK, but I take that back Chesapeake roots… you make progress when you go down the hall and humbly ask questions about an area where you're not the expert. I feel like I still do that today. I know a couple of things, but it is humbling how many things I don't know in this space. The only way to get better is to lean on partners and ask good questions.

Absolutely, that's exactly what I'm doing here today, asking the questions I don't have the answer to. It's been incredibly insightful. Paul did you have anything to add?

Paul- In terms of the next steps and thinking about where you are, to emphasize the point that Liz just made, from our end on the emissions management side, and the carbon accounting side, here's a fun mental exercise: Ask yourself if you were to accurately report on your GHG inventory across all three Scopes, how many different pieces of software or how many different applications would all of that data live in across your company for your entire asset portfolio? Think of an operator who has assets on multiple basins or in multiple international regions, and think about all the different activities that they're doing, and where that data lives… is it siloed? Do you have visibility into it? Then ask yourself how long is it going to take us to put together a sustainability report? How many people are we going to have to pull together? Do we have to hire third parties just to help consult with us to figure out how we can make sense of this web of information. When you're thinking about the next step, there are solutions out there that address that. What we're providing at Envana is, in a word, simplicity. We want to simplify this complex world of emissions tracking and reporting. We're doing it in a way that's bespoke and focused on the gas industry because we come from that industry. It's not an industry that we're coming to, it's an industry that we're coming from. Most of the people here, including myself, have made their careers here. We're passionate about it and it has tremendous good to offer the world and society. We want to continue to help our customers do that in a sustainable way and in a way that is forward-looking while still recognizing the tremendous value that the industry brings now and well into the future. If you're thinking on this gives you a headache because navigating through your tech stack — in whatever state it may be in so that you can get all of this information into a centralized solution seems like a difficult task — that's what we're here… to help. We don't shop the technology solutions. We sit with our clients and we help point them in the direction and say, “OK we understand that this is a challenge; we understand that you may have to integrate several business units. We work with you as trusted advisors who you can rest assured understand the language that you speak, understand this industry and understand the you know the data migration challenges, data quality challenges. We can navigate you through that journey both on a technical level when it comes to technical implementation and making sense of that and also on a broader market-driven level. And once you do that, the exciting thing is that it unlocks tremendous potential. You can capitalize very effectively on the wonderful offering that Liz has been talking about today from EarnDLT. I would invite you to ask those questions, take an accounting of what your tech stack looks like, what your asset portfolio looks like, and the amount of time, people, and manual processes that are spent trying to consolidate that information into a meaningful look at your emissions across your company and reach out to us and you can reach out to us at just Envana.com and we'll respond to you very quickly. We're excited to help.

Some great actual advice. Thank you both for such a brilliant episode and for taking the time to join me on Methane Talks today.

Edited for clarity.

We invite you to listen to the episode on Methane Talks. If you wish to connect with Paul or any of the Envana members to discover what our team can do to help you accomplish your methane goals, please connect with us.

Connect on LinkedIn: Paul Hajek | Liz Arthur