On August 18, 2015, the Environmental Protection Agency, or EPA, proposed “new source performance standards” to directly regulate methane emissions from the oil and gas sector. Methane is a greenhouse gas that is even more potent than carbon dioxide. Over the first 20 years after being released into the atmosphere, methane is more than 80 times as effective at trapping heat in the atmosphere as carbon dioxide. Over 100 years, methane remains 28 times more powerful.
This proposed rule is one part of the Obama administration’s larger effort to reach a goal set in January 2015: a 40 percent to 45 percent reduction in methane emissions from the oil and gas sector from 2012 levels by 2025. The EPA estimates that the proposed standards on new and modified sources would stop up to 400,000 short tons of methane from being leaked by 2025, the equivalent of up to 9 million metric tons of carbon dioxide.
After the EPA released the rule, oil and gas industry groups quickly criticized it as being unnecessary and costly. The American Petroleum Institute said it is “duplicative, costly, and undermine[s] America’s competitiveness.” America’s Natural Gas Alliance called the proposal “unnecessary and counterproductive,” claiming that existing regulations and industry innovation would be enough to drive emissions reductions.
These statements, while a predictable spin from industry trade associations, do not reflect the facts.
Why implementing the rule makes sense
First, this rule is one more essential step on the country’s long march to achieving the greenhouse gas emissions reductions needed to avert the worst impacts of climate change. Methane is second only to carbon dioxide as the most prevalent greenhouse gas in the United States. As a result, any successful climate change mitigation strategy will need to tackle this pollution source. Nearly 30 percent of methane emissions from human activities come from leaks in the oil and gas system. Moreover, methane emissions from the oil and gas sector are projected to grow approximately 25 percent in the next decade if left unaddressed.
Second, the EPA’s rule is necessary to reduce methane pollution because voluntary industry measures have not been effective on their own. Out of the thousands of oil and natural gas companies currently in operation, less than 1 percent participate as partners in the agency’s long-standing Natural Gas STAR Program. This raises questions about whether the EPA’s new voluntary methane reduction initiative, the Natural Gas STAR Methane Challenge Program, will attract robust industry participation.
Third, although the oil and gas industry would need to invest in equipment to plug methane leaks in order to comply with the rule, such equipment is both available and affordable. Both the Environmental Defense Fund and the Clean Air Task Force have referred to methane emissions from the oil and gas sector as “low-hanging fruit,” since industry can cut emissions cost effectively using existing technology that is already in use. In fact, some of this technology pays for itself. The EPA estimates that industry will be able to offset $30 million of the annualized engineering costs of implementing the rule if it sells 8 million thousand cubic feet of recovered methane in 2020.
It is important to look at the estimated costs of the EPA rule in the context of the massive financial resources at the disposal of the oil and gas industry. The EPA estimates that the new source standards outlined in the proposed rule would cost the oil and gas sector $150 million to $170 million in 2020. In comparison, Continental Resources—one of the largest oil producers in the Bakken Shale formation, which stretches across Montana and North Dakota—reported $4.8 billion in revenue for 2014 and $977 million in profits. EOG Resources—another major oil producer in both the Eagle Ford Shale formation in Texas and the Bakken Shale—reported net operating revenue of $18 billion in 2014 and $2.9 billion in net income. In a similar vein, ExxonMobil and Chesapeake Energy, two of the largest natural gas producers in the United States, reported $32.5 billion and $21 billion in 2014 revenue, respectively. The cost of implementing the EPA’s proposed methane pollution standards pales in comparison to the oil and gas industry’s annual revenue, even in times of low oil prices.
Finally, the proposed rule would improve human health. Methane pollution often goes hand in hand with other harmful pollutants, including smog-forming volatile organic compounds, or VOCs, and cancer-causing air toxins. In 2012, the EPA issued a rule to control VOC emissions from natural gas wells. The EPA’s proposed methane standards would have the co-benefit of reducing VOC pollution from additional sources, making the air easier to breathe for everyone, especially those suffering from asthma or other respiratory conditions.
Further options to reduce methane pollution
The new EPA proposal is just one leg of the Obama administration’s plan to cut methane pollution. The U.S. Bureau of Land Management is also drafting a rule to reduce venting and flaring of methane on public lands. And the EPA recently released a draft plan to regulate methane emissions from landfills.
Most importantly, the EPA must look ahead to developing pollution reduction standards for existing sources of methane pollution in the oil and gas sector. The proposed performance standards apply only to new and modified sources of methane pollution in the oil and gas sector. Under the Clean Air Act, the EPA is now required to issue regulations for states to submit plans for reducing methane from existing sources. This will be critical: By 2018, nearly 90 percent of the oil and gas sector’s methane emissions will come from sources that were already in operation by 2011.
More than a year ago, the state of Colorado issued rules to directly regulate methane from the oil and gas sector after negotiations with large operators in the industry and the environmental community. In response to the EPA proposal, Colorado Gov. John Hickenlooper (D) said that Colorado’s experience shows that “protecting public health and the environment, and promoting our energy industry are not mutually exclusive endeavors.” Following this practical approach, the EPA’s new source proposal simply asks oil and gas companies to adopt industry best practices and use readily available technology to reduce wasteful methane emissions. This is an achievable goal for industry—and one that is critical if the United States is to respond successfully to the threat of climate change.
Myriam Alexander-Kearns is the Research Associate for the Energy Policy team at the Center for American Progress.