Despite pleading with oil and gas companies to boost their output in recent months, to tackle global shortages and rising prices, President Biden is once again hitting the industry hard by proposing a greater emissions reduction in operations. And he’s not the only one, as the U.K. and EU look to reduce gas flaring and venting practices to curb their methane emissions in line with climate pledges.
The Biden Administration has proposed a rule to further limit methane leaks and gas flaring on public land, which could have a significant impact on the industry if passed. It would build upon the extension of the Environmental Protection Agency’s (EPA) 2021 rule that requires drillers to detect and plug leaks at well sites across the country. The Interior Department is recommending the new rule to support Biden’s aim of reducing emissions and meeting U.S. climate pledges. It would mean stricter monthly time and volume limits on gas flaring in oil and gas operations. Scientists believe that a significant reduction of methane emissions worldwide would have a major impact on climate change, helping to reduce the effects of global warming in line with Paris Agreement targets.
In addition to reducing levels of flaring, the proposal would mean that energy firms must establish waste minimisation strategies, showing that they have the necessary pipeline capacity for their anticipated gas production. It could lead to new projects being rejected if deemed to have levels of gas flaring beyond the stipulated maximum. Interior Secretary Deb Haaland explained, “This proposed rule will bring our regulations in line with technological advances that industry has made in the decades since the BLM’s (Bureau of Land Management) rules were first put in place, while providing a fair return to taxpayers.”
If passed, the proposal is expected to generate $39.8 million annually in royalties for the U.S., as well as prevent billions of cubic feet of gas from being released into the atmosphere. BLM Director Tracy Stone-Manning stated, “This draft rule is a common-sense, environmentally responsible solution as we address the damage that wasted natural gas causes.” She added, “It puts the American taxpayer first and ensures producers pay appropriate royalties.
Several moves have been made to reduce various greenhouse gas emissions in recent months, which are expected to change the landscape of the oil and gas industry. In addition to the new EPA and BLM rules, Biden’s Inflation Reduction Act (IRA) is expected to help reduce both carbon and methane emissions by taxing oil and gas producers that exceed emissions limits.
The U.S. has pledged to cut its methane emissions by 30 percent by 2030 from 2020 levels. At the COP27 climate summit in November, White House national climate adviser Ali Zaidi stated that the U.S. government will embark on “a relentless focus to root out emissions wherever we can find them.” And as oil and gas production releases the highest level of methane emissions, it is not surprising that Biden is aiming new emissions-cutting policies at fossil fuel companies. EPA Administrator Michael Regan said at COP27, “Our regulatory approach is very aggressive from a timing standpoint and a stringency standpoint.” He suggested that the old and new rules will reduce energy waste by around 80 percent, cutting 36 million tonnes of carbon emissions.
This move comes after years of criticism around the U.S. methane problem. Studies have repeatedly shown that oil and gas firms in the U.S. have been underreporting methane leaks in their operations. A 2022 reportstated that methane emissions in the Permian Basin from big oil and gas firm operations “are likely significantly higher than official data.” It suggested, “A very significant proportion of methane emissions appear to be caused by a small number of super-emitting leaks.” Earlier this year, 21 oil wells were found to be leaking methane in California at a level of 50,000 parts per million of methane or more, which led to a huge plugging operation.
And this issue is not only limited to the U.S., with the EU and U.K. responding to years of neglect of abandoned oil wells. Earlier this year, the European Commission proposed regulations to massively reduce methane emissions, placing pressure on oil and gas firms in the region to do more. The proposal includes reporting obligations for EU importers and restrictions on gas flaring. Similarly, the U.K.’s Oil and Gas Authority (OGA) has ordered an end to routine flaring and venting by 2030. This would give the OGA the authority to halt production if flaring and venting levels are deemed too high.
In response to mounting pressures to curb greenhouse gas emissions, particularly carbon and methane waste, governments worldwide have begun to introduce stricter policies on oil and gas operations. The supporting policy framework, developed in recent months in the U.S., is expected to help the BLM proposal on gas waste be effectively carried out if passed. And other powers, such as the U.K. and EU, are expected to follow in America’s footsteps by introducing their own limitations on flaring and venting.
By Felicity Bradstock for Oilprice.com
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