Cop: US finalises broad methane limits on oil sector

  • Market: Crude oil, Emissions, Natural gas
  • 12/02/23

Dubai, 2 December (Argus) — Oil and gas producers across the US will have to address methane leaks and gradually eliminate routine flaring from new wells under landmark regulations finalised today by President Joe Biden's administration.

The regulations for the first time will impose federal methane limits on the vast number of existing oil and gas facilities across the US, cutting methane emissions from those facilities by a projected 80pc more than expected business-as-usual levels. The US Environmental Protection Agency (EPA) expects the rule will prevent the release of 58mn tonnes of methane from 2024-2038, which is equivalent to 1.5bn t of CO2.

EPA unveiled its methane rule during the Cop 28 UN climate conference in Dubai, giving the US an example of efforts to achieve its Paris Agreement pledge to reduce greenhouse gas emissions (GHG) by half by 2030, compared with 2005.

The emissions reduction from the methane rule in 2030 alone is projected to be 130mn t of CO2e. “That amounts to almost 2pc of our annual emissions, helping to close that gap even further,” White House climate adviser Ali Zaidi told reporters in Dubai.

Zaidi also said the regulation is just one of more than 100 actions the US has taken over the past year to address methane, including the deployment of millions of dollars through the IRA.

Methane is a highly potent GHG that routinely leaks from oilfield equipment such as pneumatic controllers, storage tanks, compressors and flares. The final rule will require operators to replace leak-prone equipment and create programs to regularly look for leaks, complete timely repairs and phase out routine flaring. EPA expects those efforts will allow for the capture of more than 1 Bcf/d of natural gas that can be sold to customers, in addition to preventing the release of 16mn t of volatile organic compounds from 2024-2038.

EPA said it has strengthened the rule since it was [first proposed](https://direct.argusmedia.com/newsandanalysis/Article/2269903) in November 2021, in part through a [supplemental proposal](https://direct.argusmedia.com/newsandanalysis/Article/2390407) last year that would require phasing out routine flaring of associated gas from new oil wells. In response to industry feedback, EPA said it has revised that proposal to phase in the flaring restrictions over two years, in addition to offering flexibility to allow flaring at wells that do not release significant amounts of natural gas.

The Biden administration's crackdown on methane emissions have split the oil and gas sector, with small producers raising concerns that the recurring cost of looking for methane leaks will ultimately force them to shut in large numbers of marginal wells. Larger producers that already have methane programs have offered support for uniform federal methane regulations.

“BP welcomes the finalisation of a federal methane rule for new, modified and – for the first time – existing sources,” BP America president Orland Alvarez said. "A well-designed rule will help drive material methane emission reductions this decade and beyond.”

The final rule will include a "super emitter program" under which third parties will be able to use remote sensing technology to report large methane leaks.

EPA is regulating methane from existing oil and gas facilities under a section of the Clean Air Act that will require states to draft compliance plans. EPA had proposed to give states 18 months to submit plans, with compliance for oil and gas facilities required within 36 months. That could mean binding emission cuts might not be required in some states until 2028, assuming the regulations hold up in court and are not revised by a future administration.

Even with the lag time in compliance, oil and gas operators will still have incentives to achieve early emission cuts to avoid a new federal "fee" on excessive methane leaks. That fee, created by the Inflation Reduction Act, will start at $900/t next year and rise to $1,500/t in 2026, with collection staying in effect until states fully comply with the new methane regulations.

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