Another methane regulation. Another ultimately unwinnable battle over a methane regulation.
In early December, in an announcement at the United Nations COP28, the U.S. Environmental Protection Agency (EPA) released its final rule for methane emissions in the oil and gas industry.
The rule will require frequent monitoring and repair of methane leaks. It also covers storage vessels that regulations have not touched previously. And, it aims to phase out venting and flaring of gas from oil wells.
The rule is necessary and benefits both the environment and the energy industry.
“This final rule is one of the Biden Administration’s signature actions to address climate change,” Gibson Dunn attorneys wrote in an analysis. “In finalizing the rule, EPA … also moved forward with its novel ‘Super Emitter’ program that allows third parties to track large emissions events.”
The rule has been in the works since President Joe Biden took office and EPA evaluated plenty of input (almost 1 million comments) in crafting its 1,690 pages. When it takes effect, all sources of methane emissions built, modified or reconstructed since Dec. 6, 2022, will need to be in compliance with the rule’s standards.
The Biden administration expects the rule to prevent 58 million metric tons of methane emissions from 2024 to 2038. That would result in net climate and ozone health benefits of almost $100 billion during that time (in 2019 dollars). The rule encourages the use of advanced methane detection technology, including satellites and aerial surveys, to detect leaks and streamlines the process for owners and operators to employ new technologies.
Not a good look
A question over its necessity might stem from its timing. North American emissions from flaring fell 28% from 2019 to 2022, and levels fell in three consecutive years, from 2020 to 2022, according to the International Energy Agency (IEA).
So, things are great, right? Or at least headed in the right direction?
No to the first, sorta/kinda to the second. Despite those drops, emissions from flaring were 63% higher in 2022 than in 2010. U.S. crude oil production rose 117% in that time, so the industry performed extremely well in limiting emissions during the shale revolution.
But while emissions in a relative sense went down, in an absolute sense, they went up. That is the wrong direction for battling climate change, particularly for the industry most blamed for climate change. Job No. 1 for the oil and gas industry has to be reducing emissions from its own operations by 60% by 2030, which the IEA has said is necessary to meet net-zero goals by 2050.
No sooner than the kilobytes hit the servers, the EPA’s regulation faced resistance. Rep. Cathy McMorris Rodgers (R-Wash.), chair of the House Energy and Commerce Committee, immediately knocked the agency’s latest “rush-to-green” effort.
“I’m deeply concerned these latest steps to enact additional burdensome regulations for methane could dramatically expand the agency’s regulatory reach in a manner that will stifle innovation, increase operational costs and increase the price of energy,” she told Bloomberg.
IPPA expressed concern, as well. The rule involves complicated new requirements, the organization said, and could lead to the shutdown of as many as 300,000 of the nation’s 750,000 low-production wells “that are essential to our country’s energy production.”
The rule shifts much of the enforcement burden to the states and could result in higher costs for oil and gas states’ regulatory agencies, as well as the industry and consumers. However, the Inflation Reduction Act includes billions to help meet those requirements, and New Mexico has seen emissions decrease as its oil and gas production increased since it implemented its own methane rules.
There is another reason, perhaps an existential one, to not fight the EPA’s new rule. The oil and gas industry currently ranks near the bottom of business sectors in reputation, according to Gallup. That’s just barely ahead of the federal government and the pharmaceutical industry, and well behind healthcare, advertising and the legal field.
Read that sentence again. Lawyers—lawyers—are more popular than oil and gas.
The problem transcends reputation, per se. Staying in business requires innovation and that requires attracting and retaining a new generation of talent. The industry’s bad rep harms that effort.
Taking the lead on limiting methane emissions is good for the environment, good for production by capturing and selling gas instead of allowing it to escape, and a good start to restoring the industry’s badly damaged reputation.
Fighting the EPA’s methane rule accomplishes none of that. It just sets up the industry for long-term setbacks.
Recommended Reading
Baker Hughes Awarded Saudi Pipeline Technology Contract
2024-04-23 - Baker Hughes will supply centrifugal compressors for Saudi Arabia’s new pipeline system, which aims to increase gas distribution across the kingdom and reduce carbon emissions
President: Financial Debt for Mexico's Pemex Totaled $106.8B End of 2023
2024-02-21 - President Andres Manuel Lopez Obrador revealed the debt data in a chart from a presentation on Pemex at a government press conference.
Green Swan Seeks US Financing for Global Decarbonization Projects
2024-02-21 - Green Swan, an investment platform seeking to provide capital to countries signed on to the Paris Agreement, is courting U.S. investors to fund decarbonization projects in countries including Iran and Venezuela, its executives told Hart Energy.
BP Pursues ‘25-by-‘25’ Target to Amp Up LNG Production
2024-02-15 - BP wants to boost its LNG portfolio to 25 mtpa by 2025 under a plan dubbed “25-by-25,” upping its portfolio by 9% compared to 2023, CEO Murray Auchincloss said during the company’s webcast with analysts.
Sunoco’s $7B Acquisition of NuStar Evades Further FTC Scrutiny
2024-04-09 - The waiting period under the Hart-Scott-Rodino Antitrust Improvements Act for Sunoco’s pending acquisition of NuStar Energy has expired, bringing the deal one step closer to completion.