Updates with changes throughout
President Joe Biden aims to cut methane emissions from the oil and gas sector by nearly 75pc by 2030, relative to 2005, with regulations that for the first time would apply to nearly 300,000 existing wells and other facilities in the US.
The US Environmental Protection Agency (EPA), in a regulation proposed today, wants to require operators to replace "pneumatic controllers" at existing oil and gas facilities that emit high levels of methane, a potent greenhouse gas. US operators would also have to look for methane leaks at large wells and compressor stations as often as four times a year, while limiting releases from storage tanks and during well servicing.
Those requirements would pose a net cost to industry of $680mn-$760mn/yr, after accounting for the value of capturing up to 660mn cf/d (19mn m3/d) of additional natural gas by adding methane controls, according to agency projections. But EPA expects the rule will deliver a far larger $5.2bn/yr in global climate benefits by reducing 41mn short tons (st) of methane by 2035. That is the carbon-equivalent of eliminating the emissions from all US passenger cars and commercial aircraft in 2019, the agency said.
"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," agency administrator Michael Regan said.
The rule serves as a down payment for the US' participation in a new "global methane pledge," with more than 100 countries signing on to a goal of cutting methane emissions worldwide by 30pc by 2030, relative to 2020 levels. The unveiling of the rule comes as Biden meets with world leaders at the UN's Cop 26 climate conference in Glasgow, Scotland.
But the lag time before the methane rule would fully take effect — EPA expects less than 1pc of the emission cuts will occur during Biden's first term — could raise questions about the rule's durability. Adding to the uncertainty is the US Supreme Court's recent decision to hear a sweeping challenge to EPA's authority to regulate greenhouse gases from stationary sources, although legal experts expect the court will focus on novel aspects of a since-abandoned 2016 rule that created a cap-and-trade-like system for CO2 from power plants.
"That issue is not present in the methane rule," New York University School of Law professor Richard Revesz said.
The methane proposal has drawn criticism from some Republicans, who say Biden has overstepped in his climate goals and is going to raise energy prices. Oil and gas groups say they are still reviewing the proposal, but most generally support the idea of EPA regulating methane. They see that as preferable to a Democratic plan to put a $1,500/metric tonne fee on methane leaks that could cost the industry billions of dollars a year.
"The appropriate policy tool to further reduce methane emissions is through the EPA regulatory process, rather than adding new, punitive taxes on the industry through a methane tax," American Exploration & Production Council chief executive Anne Bradbury said.
Targeting largest sources
US independents have been among the most outspoken critics of EPA's long-term push to regulate methane from existing facilities, based on concerns that having to regularly survey for methane leaks could make it unprofitable to operate less productive wells.
But in a win for small producers, EPA said operators of facilities expected to release less than 3st/yr of methane will only need to conduct one leak survey, with no regular monitoring required afterwards. For facilities with higher levels of annual emissions, EPA wants to require twice-a-year or quarterly leak surveys. Surveying is expected to have a net cost of $349mn/yr, while providing 35pc of the emission cuts by 2035.
EPA's second-most costly requirement would force industry to switch entirely to zero-emission pneumatic controllers, at a cost of $280mn/yr, while providing 46pc of the emission cuts. Other methane cuts would come from cutting emissions from compressors, storage tanks, pneumatic pumps or when removing liquids from wells. EPA also has proposed eliminating methane venting of associated gas.
EPA is also pursuing tougher methane rules for new oil and gas sources that would take effect in late 2022, when the agency expects to finalize the regulation. But EPA does not expect substantial emission cuts from existing facilities until 2026, because of the time it will take for states to come up with plans to implement the regulations under section 111(d) of the Clean Air Act.
EPA early next year plans to propose a separate rule that would set time lines for states to submit implementation plans for the methane regulation and all future regulations under section 111(d). EPA said states should allow a maximum of two years for industry compliance once they submit their compliance plans.
