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How Will Methane Regulations Impact America’s Oil And Gas Industry?

The United States and the European Union are calling on the world to join a global initiative for a significant reduction in methane emissions, as major economies proceed with plans to tackle the worst effects of climate change. 

At a recent summit, the United States, the EU, and several other countries, including OPEC’s number two, Iraq, indicated that they would support the so-called Global Methane Pledge.   

The initiative, expected to be launched at the UN Climate Change Conference (COP 26) in November in Glasgow, calls for countries to join it in committing to a collective goal to cut global methane emissions by at least 30 percent from 2020 levels by 2030. The signatories would also pledge to use the best available inventory methodologies to quantify methane emissions, with a particular focus on high-emission sources. 

A pledge to slash methane emissions could directly impact regulations concerning the U.S. energy sector, which has already expressed its opposition to plans from House Democrats to introduce a fee on methane. 

Methane More Powerful Greenhouse Gas Than CO2

Methane, the second-most abundant anthropogenic greenhouse gas, accounts for around 20 percent of global emissions and is more than 25 times as potent as carbon dioxide (CO2) at trapping heat in the atmosphere, according to the U.S. Environmental Protection Agency (EPA). 

Methane concentrations in the atmosphere have more than doubled over the last two centuries, predominantly due to human-related activities. 

Related: Shell Exits Permian In $9.5 Billion Deal

“Because methane is both a powerful greenhouse gas and short-lived compared to carbon dioxide, achieving significant reductions would have a rapid and significant effect on atmospheric warming potential,” the EPA says. 

China, the United States, Russia, India, Brazil, Indonesia, Nigeria, and Mexico are estimated to be responsible for nearly half of all anthropogenic methane emissions, according to the agency. In the United States, the largest source of methane emissions is the agriculture sector, including manure management, followed by natural gas and petroleum systems which accounted for 30 percent of U.S. methane emissions in 2019. 

Methane Emissions By Source

Source: EPA 

Global Methane Pledge

As the Biden Administration looks to advance its ambitious climate plan, the United States and the EU urged last week other countries to join the Global Methane Pledge and praised those that have already signaled support to it. Those include EU member Italy, plus Argentina, Ghana, Indonesia, Iraq, Mexico, and the UK. 

The energy sector has the greatest potential for targeted reduction of methane emissions by 2030, the joint EU-U.S. statement on the initiative says. 

“Rapidly reducing methane emissions is complementary to action on carbon dioxide and other greenhouse gases, and is regarded as the single most effective strategy to reduce global warming in the near term and keep the goal of limiting warming to 1.5 degrees Celsius within reach,” the EU and the U.S. said. 

Referring to climate, UN Secretary-General António Guterres said last week, “We are on the verge of the abyss.” 

“There is a lot of mistrust between developed countries, developing countries. There is a north-south divide that is making it difficult for all to assume commitments, to reduce emissions, in order to have a drastic reduction the next decade or two and reach carbon neutrality in 2050,” Guterres said in an interview with UN News. 

U.S. Methane Regulations On Energy Industry 

Reaching common global goals about emissions reduction would need changes to regulations at the national level, too. 

In the United States, Democrats in Congress are proposing higher fees and royalty charges on the oil and gas industry in the $3.5-trillion spending plan, including a fee on methane. 

The largest U.S. natural gas producers and associations oppose the proposed fee and are calling on U.S. Senate committees to reconsider it, arguing that direct regulation would serve the purpose of cutting emissions best. 

Although the spending plan is not finalized yet, U.S. natural gas associations are pre-emptively opposing what the American Petroleum Institute (API) described as “a misguided punitive tax on natural gas.” 

“If the objective is to reduce methane emissions, direct regulation of methane is the best method to implement such a government policy and do so in an equitable manner that is tied to actual emissions,” the API and 130 energy, manufacturing, business, and labor trade organizations across the natural gas and oil supply chain wrote in a letter to the U.S. Senate Committee on Environment and Public Works.

“[B]ecause the bill would tax companies based on the amount of oil or natural gas they produce or handle, not based on their actual emissions, it could perversely disincentivize facilities with higher emissions intensities relative to the basin average from reducing their emissions. At the same time, this approach could unfairly punish high production operators with lower emission intensities,” the organizations say.

The American Gas Association (AGA), for its part, says that a methane tax would be “devastating for families and businesses.”

“This is the wrong approach for emissions reduction and penalizes consumers,” AGA argues. 

The Biden Administration will surely want to have the oil and gas industry slash their methane emissions, but punitively taxing the sector—which still provides the single largest share of electricity in the U.S., 40 percent—may not be the best course to achieve lasting reductions in greenhouse gas emissions while keeping America’s energy supply reliable. 

By Tsvetana Paraskova for Oilprice.com

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Leave a comment
  • Kay Uwe Boehm on September 22 2021 said:
    Good and like it looks all accepted tnitiative since leakage of methane not needed sometimes whole gas field.is streamimg out if closing not prepared im case of oil from grounf hole like in USA bombing can close and stop that quickly. Methane absolute green house effect is lrss than of CO2 already less only about +0.5°C +100ppm +2ppm/a and the more methane the more decay.
    Long time made also much flaring ot methane now more using it as LNG.
  • Jonathan Flesher on September 22 2021 said:
    the price of natural gas is soaring... let's put in place more regulations to push prices up higher! At the end of the day when the entire economy shut down during Coronvirus total emissions didn't go down that much. I believe 12% in the US but less worldwide. If completely stopping the economy only changed that little we need to rethink what we are doing now. spend the money on adapting and getting as many people in the world reliable electricity.

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