US proposes enhanced methane rules for oil and gas

The US government on November 2 unveiled a proposed new Clean Air Act that would seek to reduce methane emissions from the domestic oil and natural gas sector.

The measure was widely expected as US president Joe Biden attends the second day of the COP26 environmental summit in Glasgow. Methane is a potent greenhouse gas that can trap roughly 30 times more heat than CO₂ over a 100-year period.

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The US Environmental Protection Agency (EPA), overhauled to continue its mandate after it was watered down by former president Donald Trump, said it was the domestic oil and gas industry that was the largest industrial source of methane emissions.

“The proposed new Clean Air Act rule would lead to significant, cost-effective reductions in methane emissions and other health-harming air pollutants that endanger nearby communities,” said EPA administrator Michael S. Regan. “With this historic action, EPA is addressing existing sources from the oil and natural gas industry nationwide, in addition to updating rules for new sources, to ensure robust and lasting cuts in pollution across the country.

The agency said it analysed the potential impact the proposed rule would have on oil and natural gas prices from 2023 to 2035 and found it would be “pennies per barrel of oil or thousand cubic feet of gas.” Both crude oil and natural gas prices are at multi-year highs.

The American Petroleum Institute (API), a trade group representing the interests of hundreds of oil and gas companies, said it too supported direct regulation of methane from new and existing sources.

“EPA has released a sweeping proposal, and we look forward to reviewing it in its entirety,” API’s senior vice president for policy, economic and regulatory affairs Frank Macchiarola said. “We will continue working with the agency to help shape a final rule that is effective, feasible and designed to encourage further innovation.” 

The EPA said its proposal could cut methane emissions by 41mn tons from 2023-2035, which the agency said is the equivalent of CO₂ emissions from all US passenger vehicles and commercial aircraft in 2019.

Key measures of the plan range from monitoring and eliminating vented gas to performance standards for various upstream operations. The Interior Department, which manages oil and gas operations on public lands and in federal waters, said it aimed to disincentivise flaring of associated gas by proposing that operators pay royalties to the federal government for vented or flared gas.

The proposal has its critics. Three Republican members of the House Committee on Energy and Commerce – Cathy McMorris Rodgers of Washington, David B. McKinley of West Virginia and Michigan’s Fred Upton – said they were concerned the proposal would lead to higher commodity prices, despite the assurances from the EPA.

“With a harsh winter predicted and energy prices at seven-year highs, president Biden and the EPA are proposing more regulations that could raise energy prices even more for families,” they said. “We look forward to reviewing this proposal and continuing our oversight of the administration to make sure any new regulations are justified and cost-effective, especially with the cost of gasoline and natural gas already surging this year.”

The EPA said it will vet comments on the proposed rule, issue a supplement proposal next year and possibly issue a final rule before the end of 2022. A federal report on the rule can be found here.