Amy DenneyOver the next couple of years, U.S. oil and gas companies will have to start complying with new regulations that could reduce methane emissions by 58 million tons – the equivalent of heating 8 million homes in the winter.
The Environmental Protection Agency (EPA) announced its final regulations Dec. 2 at the 28th annual United Nations Climate Change Conference in Dubai.
This action follows a climate assessment released Nov. 14 by the U.S. Department of Energy that stated the country is at an increased risk of extreme weather events due to climate change. The report noted mitigation efforts to reduce emissions would help but also adding wind and solar electricity-generating capacity.
The EPA’s final rule will require oil and gas companies to eliminate routine flaring of natural gas from new oil wells as one way to reduce methane emissions.
Flaring is a controlled burn of excess natural gas during the testing of pressure, flow and composition in oil and gas production. Companies may also flare for safety purposes or to manage gas that cannot be captured for processing. During the flare process, some methane gas is also released into the atmosphere, where it traps heat.
Because methane is a greenhouse gas (GHG), the EPA’s new regulations aim to reduce the amount of methane and other volatile organic compounds (VOCs) emitted. The EPA estimates 16 million tons of VOCs could be avoided through the new regulations.
Other regulations would require companies to routinely monitor for methane leaks at well sites and compressor stations and reduce emissions from high-emitting equipment, such as controllers, pumps and storage tanks. The EPA reports recent studies indicate most methane emissions produced from oil and gas operations come from a small number of sources.
Guidelines allow for a two-year phase-in process and an accelerated path to work with other businesses to use innovative and low-cost monitoring practices.
“We’ve crafted these technology standards to advance American innovation and account for the industry’s leadership in accelerating methane technology,” EPA Administrator Michael S. Regan said in a news release. “Thanks to robust public feedback and engagement with states, Tribes, companies and organizations, we are finalizing this historic action to reduce climate pollution, protecting people and the planet.”
Reacting to the regulations
More than 1 million comments from the public were submitted to the EPA over the proposed regulations.
Among those was Jason Modglin, president of the Texas Alliance of Energy Producers, which represents over 3,000 members that include single operators to publicly traded companies. In a survey of 130 of its members, 56% reported that new federal regulations were the top concern due to the cost to their businesses.
“Led by Texas, the U.S. can produce enough oil and natural gas for our domestic needs while providing more energy security to our allies,” Modglin said in an April statement.
In his comment to the EPA, Modglin said the EPA should instead focus on promoting the development of American oil and gas and on infrastructure that would support opportunities to export energy around the world.
TAEP members support reducing methane emissions to protect the environment and minimize waste, but Modglin said they do not support a one-size-fits-all mindset.
“Our concern is that the proposed rule … will result in making those wells uneconomic, likely leading to shuttering, simply as a result of its implementation,” he said in his statement to the EPA. “Any rule that imposes a cost on the operator would clearly disadvantage smaller operators relative to larger operators, and adversely impact communities across Texas that rely on small businesses.”
New Mexico has been at the forefront of advancing new oil and gas rules. The New Mexico Environment Department worked with the EPA to create the final national regulations after issuing its own new rules effective in August 2022.
New Mexico’s goal is to reduce VOCs by 260 million pounds annually. New regulations included having oil and gas operators check emission rates and for leaks monthly and fix issues within 15 days.
“We are proud to have laid the foundation for this national rule, which will not only reduce emissions but spur innovation and economic development across the country,” New Mexico Gov. Michelle Lujan Grisham said in a news release.
The EPA also has a Methane Emissions Reduction Program and partnered with the Department of Energy and National Energy Technology Laboratory to offer grants to help the oil and gas industry monitor and reduce methane emissions from low-producing conventional wells. The application process closed in October for $350 million in grants, which the EPA will award later in December, according to the EPA’s office of public affairs.
The grants are the first of many competitive funding opportunities through the Inflation Reduction Act (IRA), which will provide more than $1.55 billion in funding and technical assistance to oil and gas companies to reduce methane and other GHGs.
“This investment will increase competition and help small and medium-sized producers compete on a more level playing field, create new good-paying jobs in energy communities, and support environmental restoration, making clear that strengthening our economy, tackling climate change, and protecting our communities go hand in hand,” Regan said in the release.
Additionally the IRA seeks to target companies considered high polluters. Beginning in 2024, the EPA will charge companies that report carbon emissions of more than 25,000 metric tons a fine starting at $900 per metric ton, increasing each year after. The law also requires the EPA to assess royalties on all gas produced, including any lost through flaring or venting, a similar practice.
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