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Paradise, Part 3 - Midstreamers' ESG Agendas Focus on Reining in Methane, CO2 Emissions

Many leading energy companies have come to accept the reality that environmental, social, and governmental (ESG) matters are now front-and-center concerns to an increasing number of investors and lenders. Their challenge, of course, is that the hydrocarbon-based commodities they produce, process, transport, and refine are by their very nature prospective generators of carbon dioxide and other greenhouse gases that the ESG movement is targeting. What’s an energy company to do? For many midstream companies, the answer — for now at least — is to focus on minimizing the release of methane, carbon dioxide (CO2), and other GHGs from their gas processing plants, pipelines, storage facilities, and fractionators, and on switching to renewables to power their operations. Today, we continues our series with a look at how midstream companies are addressing investors’ and lenders’ concerns about the sector’s GHG releases.

This is the third episode of our exploration of energy-industry ESG, a topic we’ve been investigating for some time — partly in response to the many inquiries we’ve been receiving from clients and subscribers. In Part 1, we said that while the energy industry has been rebounding from a mostly dismal 2020, many investors and lenders have become hesitant — even averse — to putting their money in oil and gas. It’s not just the industry’s historic volatility that’s spooking them, it’s the unique social, political and financial pressures that hydrocarbon producers, oilfield service companies, midstreamers, and refiners face in demonstrating that they are addressing ESG issues.

In Part 2, we discussed the fact that environment issues take center stage when investors and lenders assess the ESG cred of energy companies — they need to know that businesses in question are prepared to adapt to the changing social, political and marketing landscape, and are sensitive to the growing demands for environmental stewardship. By far, the leading environmental issue facing the energy industry today is GHG emissions, which are generated at pretty much every step in the production, processing, delivery, refining, and (especially) consumption of fossil fuels. We noted that, to help in the measuring and tallying, many of the powers that be in the ESG world divide a company’s GHG emissions into three buckets:

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