New EPA methane rules are a good start, but work isn’t done

In his State of the Union address, President Obama emphasized two contradictory goals: the critical need to limit greenhouse gas pollution, and support for domestic natural gas and oil production (as well as renewable energy sources). The Environmental Protection Agency’s (EPA) announcement earlier this month on methane regulation seemingly supports both goals. How do these new regulations measure up?

The EPA announced that it will regulate methane emissions from the oil and gas sector directly, rather than relying on voluntary programs or regulating associated pollutants. This a commonsense action that reduces a very potent greenhouse gas while directing valuable natural gas back into the supply chain. The rules, which will be unveiled this summer, will apply to all new oil and natural gas wells, but they will not address emissions from existing sources.

Four key points reveal why the rules are a good start, but more is needed:

1. Regulating methane directly should have a low net cost to energy producers.

Directly regulating methane from oil and natural gas sources is critical to meeting the nation’s climate change goals. Methane is a greenhouse gas that is up to 87 times as potent as carbon dioxide over a 20-year timeframe.

As my earlier piece detailed, allowing industry to make voluntary reductions or leaving methane regulation to the states are not ideal methods to regulate this inter-jurisdictional climate pollutant. By acting to reduce fugitive methane emissions, the EPA also helps to solidify the climate benefits of natural gas power plants relative to coal, consistent with the agency’s Clean Power Plan.

{mosads}While critics of climate regulations often complain that the costs of pollution controls are too high, regulating methane will redirect natural gas back into the supply chain at little net cost to energy producers, due to the commercial value of the captured gas. Moreover, the net cost to these companies would be outweighed by the societal benefits of reducing the fugitive methane emissions.

2. Recent methane emission reductions are largely the result of the EPA’s 2012 rules for new natural gas wells, which the forthcoming rules will build on.

Some industry commentators have noted that methane emissions from the oil and gas sector have dipped 16 percent since 1990, even as gas production has grown by more than a third. In fact, much of the recent reduction is due to the EPA’s 2012 rules for new hydraulically fractured natural gas wells, which regulate smog-forming volatile organic compounds (VOCs) and reduce methane as a co-benefit.

Further, emissions are projected to increase by about 25 percent over the next decade if additional steps are not taken to reduce emissions from this growing industry. The EPA’s forthcoming rules would build upon its successful 2012 regulation by extending new source performance standards to oil and gas wells and by directly regulating methane, as opposed to VOCs, alone.

3. Up to 90 percent of 2018 emissions would be unregulated by this rule.

According to analysis by ICF International, existing sources are projected to be responsible for up to 90 percent of emissions in 2018, because new and modified gas sources are covered by the 2012 regulations, leaving older gas wells, existing oil wells and the infrastructure that supports them unregulated. This is a concern in states like North Dakota, where oil production is booming yet methane capture technology lags far behind.

“Grandfathering” these existing sources by allowing them to go unregulated may prove unwise in light of past Clean Air Act experience. In 1970, Congress struck a compromise between the treatment of new sources, which became subject to stringent regulation, and of existing sources of pollution, which were generally exempted from regulation until they engaged in “modifications,” or physical changes that increase pollution. The intent was to allow lead time for older sources to transition to the new regulations. In practice, this two-track structure created incentives for existing — and often heavily polluting — power plants to remain in operation decades longer than expected.

Here, this grandfathering concern is somewhat tempered by the fact that the methane that is captured can be sold, recouping some of the cost of the emission control equipment. Further, oil and gas production tends to fall after the first one to three years of production unless wells are re-stimulated (such as through hydraulic fracturing). The EPA’s 2012 regulations for new and modified natural gas wells considers re-fractured wells to be modified, triggering tighter pollution standards for the initial “well completion” phase of production. In its forthcoming rules, the EPA should again make clear that re-fractured wells would be subject to its methane regulations for the well completion phase. However, this would still leave some existing equipment, like compressors, valves, storage tanks, distribution pipelines and abandoned wells, beyond the scope of the new rules.

4. Further action will be taken on federal lands, and the EPA has left the door open to regulate existing sources in the future.

The Bureau of Land Management is expected to propose new rules to prevent venting, flaring and leaking natural gas from all wells on federal lands. In addition to climate and public health benefits, this should lead to higher royalty payments for the public by capturing gas that would otherwise be vented or flared.

Additionally, EPA Administrator Gina McCarthy has stated that the agency is leaving open the possibility of directly regulating methane emissions from existing oil and gas sources at a later date, after giving industry time to achieve emissions reductions through voluntary programs. But President Obama’s term ends in January 2017, leaving only a small window of time for the current administration to act on these older sources.

In short, while the EPA’s methane announcement marks progress for both domestic energy production and the climate, more work remains to be done.

Hein is the policy director at the Institute for Policy Integrity at New York University School of Law, focusing on climate change, energy and transportation issues.