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Nick Cunningham

Nick Cunningham

Nick Cunningham is an independent journalist, covering oil and gas, energy and environmental policy, and international politics. He is based in Portland, Oregon. 

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Oil Majors Unhappy With Methane Regulation Rollback

On Thursday, the U.S. EPA announced a plan to roll back federal rules on methane emissions for oil and gas companies, a gift that some in the industry are not sure that they want. The decision carries threatening implications for the climate, but it is also not without risk for the industry itself.

The proposed rule, according to the Wall Street Journal, would undo Obama-era standards that require companies to curtail methane emissions from their operations, including at drilling sites, pipelines and processing facilities. Instead of taking into account methane from the whole supply chain, the proposal would divide upstream operations from midstream, and once divided, the EPA concludes that methane emissions from each does not warrant regulation. 

The Trump administration argues that it will save the oil and gas industry between $17 million and $19 million per year, which is a pittance to an industry worth hundreds of billions of dollars.

It’s another example of the Trump administration going to more aggressive lengths at deregulation than the industry benefiting from the decisions actually wants. For instance, Trump’s plans to roll back fuel economy standards has run into opposition from automakers, some of which have abandoned Trump’s efforts and have instead joined California in supporting stricter requirements

The regulatory rollback presents another setback to climate change efforts. Methane is a powerful greenhouse gas, more than 80 times powerful than CO2 over a 20-year period. Methane accounts for about 10 percent of U.S. total greenhouse gas emissions, much of which comes from the oil and gas industry. According to a recent Wall Street Journal analysis, methane emissions from the U.S. energy industry has the greenhouse gas equivalent of 69 million cars.

“There is overwhelming scientific evidence that methane is harmful -- more harmful than we thought -- and the oil and gas sector is a bigger contributor to that pollution than we thought,” said Peter Zalzal with the Environmental Defense Fund, according to Bloomberg.

Trump’s EPA is simply not concerned with it. “I don’t see that there’s going to be some big climate concern here,” said Anne Idsal, the acting assistant administrator for EPA’s Office of Air and Radiation, according to the Wall Street Journal.

The American Petroleum Institute praised the rollback, saying that it welcomes “smart regulations.” But some oil majors have called for stricter standards. Companies like ExxonMobil, BP and Royal Dutch Shell have growing interests in natural gas production (Exxon is one of the largest gas producers in the country). Having stricter standards on methane leaks – or at least the perception that a strong regulatory regime is in place – is viewed as critical to selling gas in a carbon-constrained world.

Smaller oil and gas companies argue that the rules are too expensive, but some of the majors fear a loss of credibility due to the rollback. BP wrote an op-ed earlier this year saying that it’s “essential that the EPA regulate methane emissions.” In late 2018, Exxon called on the EPA to regulate methane. Some in the oil industry uneasy with the deregulation also fear years of legal mess from the effort – environmental groups are sure to sue.   Related: Tighter Inventories Give Oil Markets Hope

The EPA apparently shrugged off those pleas, and is moving to deregulate. Some experts believe the move will trash the industry’s reputation.

Industry groups and the EPA argue that methane regulations are not needed because oil and gas producers have every incentive to capture natural gas so they can sell the product. But the evidence to date does not back that up. Flaring in the Permian continues to break records, while Texas regulators sit idly by, which suggests that drillers want to press forward with drilling, regardless of whether or not they capture all the gas coming out of the ground.

Ultimately, the industry is fooling itself if it thinks the Trump administration is going to have the last word on methane. The Democratic presidential candidates have called for a lot more than methane regulation. An effort to gut even these modest rules could spark an even greater backlash.

By Nick Cunningham, Oilprice.com

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