This news is classified in: Traditional Energy Oil and Gas
May 13, 2016
President Barack Obama's administration today released first-time regulations requiring US oil and gas companies to limit methane emissions from new and modified equipment.
The regulations from the US Environmental Protection Agency (EPA) represent the initial step in the administration's goal to cut oil and gas sector methane emissions by 40-45pc by 2025. But EPA confirmed today it does not expect to propose methane rules for existing oil and gas sources before Obama leaves office early next year. This will leave it up to the next administration to decide how to move forward.
EPA has said federal regulations are needed to reverse a recent trend of rising methane emissions from the oil and gas sector. Efforts to combat climate change so far have focused on reducing CO2 emissions, but methane is a more powerful if less prevalent greenhouse gas. Methane's warming effect is 84 times that of carbon dioxide over a 20-year period, according to EPA.
Oil and gas companies have fought to block federal methane restrictions over concerns they will add unnecessary costs and regulatory burdens. Industry trade group the American Petroleum Institute (API) said the final rule could threaten production from shale, which from 2010 to 2015 contributed to a more than 70pc increase in US crude production.
"It does not make sense that the administration would add unreasonable and overly burdensome regulations when the industry is already leading the way in reducing emissions," API regulatory and economic policy vice president Kyle Isakower said today.
EPA in the rule finalized today has required oil and gas companies to limit methane from new and modified compressors, pneumatic controllers and other equipment used in upstream and midstream operations. Oil and gas companies will also have to regularly inspect for and repair leaks from new and modified equipment, and to capture natural gas from hydraulically fractured oil and gas wells.
EPA in the final rule removed an exemption it had proposed to provide for marginal oil and gas wells, and also required oil and gas companies to double the frequency of leak detection inspections at compressor stations. But the agency added a provision that will let companies potentially align the regulations with comparable state-specific requirements.
EPA expects the final standards will cut methane emissions by 510,000 tons/yr (462,000 metric tonnes/yr) by 2025. The agency found the $690mn/yr in estimated climate benefits provided that year will outweigh regulatory costs of $530mn/yr. EPA did not quantify the air quality benefits the rule will provide by cutting emissions of volatile organic compounds and air toxics.
The Obama administration today separately launched its efforts to develop more rules limiting methane from existing oil and gas sources, which account for about 33pc of US emissions of the potent greenhouse gas. EPA will require oil and gas companies to provide information on their operations, which the agency will use to write regulations.
EPA does not expect to conclude its information collection efforts until after Obama's final day in office on 20 January 2017. EPA administrator Gina McCarthy said this was the "best way" to gather data for a strong and effective rule.
"We are going to be moving forward as quickly as possible to get the most comprehensive record we can for the next administration to rely on," McCarthy said.
