Big Oil Is Backing Methane Regulation

The oil industry has suddenly grown concerned about its methane emissions.

In Houston, Shell executives urged the EPA to stick with federal regulations on methane. EOG Resources has agreed to methane targets at the behest of its own shareholders. BP's CEO Bob Dudley made a big show of support for action on climate change, as well as a more open approach to the way the oil industry does business. Meanwhile, the Trump administration is rolling back methane limits at the federal level.

Methane is a powerful greenhouse gas, as much as 80 times more powerful than carbon dioxide over a shorter time period. Methane can leak from pipelines and processing facilities during the extraction and shipment of natural gas. While the oil and gas industry has opposed federal regulations on methane emissions, some are warming up to the idea.

There are a few reasons for this. First, capturing methane, rather than letting it leak, can be more profitable for companies, at least in theory. Second, the oil majors are increasingly gas majors. They are making long-term bets on natural gas, particularly as climate regulations force out dirtier forms of energy like coal. If future economies are going to be carbon-constrained, the industry had better plug their leaks. Third, the majors have the resources and technologies to cut methane emissions, and since they are under pressure to do so, they want to drag the rest of the industry along. 

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ExxonMobil has been working with Environmental Defense Fund (EDF) on monitoring and reducing methane emissions. Matt Kolesar, regulatory manager at XTO Energy, a subsidiary of Exxon, said that they have slashed methane leaks since launching a leak detection program in 2017. "Just 18 months into our voluntary program we've achieved nearly a 40 percent decrease in observed leak frequency," Kolesar said in an interview with EDF.

But XTO and Exxon also want federal regulations on methane to level the playing field. "As we explained in our written comments to the EPA, ExxonMobil strongly encourages the agency to continue regulating methane emissions at new and modified sources, and to expand methane regulation to existing sources," Kolesar of XTO said.

It hasn't always been the case that shareholders, advocacy groups and the oil industry are on the same page. BP and others lobbied against methane regulations in the United States. The American Petroleum Institute lobbied against the Obama-era methane rules, calling them burdensome.

But there seems to be a change in tone more recently. BP, despite having lobbied against methane rules, announced that it too was going to team up with EDF to limit methane emissions. "We believe in direct federal regulation of methane for new and existing sources here in the United States," Bernard Looney, head of BP oil and gas production, told Reuters.

BP has aimed to cut methane emissions to just 0.2 percent of its total production by 2025, and says that it achieved that goal last year. EDF said that if the entire oil industry did as well as BP did on methane leaks, it would be the equivalent of shutting down roughly 2,000 coal-fired power plants.

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So, we now have BP, Shell and ExxonMobil calling on the Trump administration to tighten methane regulations. "We are pleased that companies like Exxon and Shell acknowledge the need for federal methane regulation," said Lila Holzman, energy program manager of As You Sow, a nonprofit organization that promotes environmental and social corporate responsibility through shareholder advocacy. "Smart methane controls represent the low-hanging fruit that companies should implement while transitioning their business models toward complete Paris-compliance."

The oil industry is under increasing pressure to take action from both the public and from shareholders. Meanwhile, the Trump administration is taking its deregulatory campaign to lengths that even the oil industry is uncomfortable with. If the likes of ExxonMobil, BP and Shell are on board with tighter regulation, it seems likely that it will occur with a new President in the White House.

By Nick Cunningham of Oilprice.com

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