Wednesday, February 28, 2024

Oil and gas industry subject to new rule on methane emissions

by BIZ Magazine

By Wes Muller, Louisiana Illuminator

A new federal rule issued Saturday targets the oil and gas industry’s methane emissions, which experts say are a primary culprit in global warming and cost Louisiana millions in lost tax revenue.

The U.S. Environmental Protection Agency’s new policy requires oil and gas facilities to perform comprehensive monitoring for methane leaks. It also phases in a requirement to eliminate routine flaring of natural gas that new oil wells produce and establishes standards to reduce methane releases from high-emitting sources such as pumps, storage tanks and pneumatic controllers.

Methane is the primary chemical in natural gas and, compared with carbon dioxide, it causes much more harm to the atmosphere in the short term. It traps over 80 times more heat than carbon dioxide over a 20-year period and is responsible for more than 25% of the atmospheric warming the Earth experiences today, according to the United Nations.

The world’s five largest methane emitters, from all sources, are China, India, the United States, Russia and Brazil. Together, they are responsible for close to half of all methane emissions globally, according to the International Energy Agency (IEA). China, the largest emitter, has similarly announced new efforts to monitor for methane leaks and reduce emissions, according to a report from Bloomberg.

According to an EPA press release, its new policy will achieve a nearly 80% reduction below the future methane emissions expected without the rule and will recover enough natural gas to heat nearly 8 million homes for the winter.

Oil and gas operations are the largest industrial source of methane emissions in the country, and the colorless, odorless gas is found at virtually every oil well because it’s a natural byproduct of oil exploration. 

Much of the methane produced in fossil fuel exploration is wasted. Around 260 billion cubic meters are currently lost to the atmosphere each year from oil and gas operations. According to the IEA, three-quarters of these emissions could be retained and brought to market using existing technologies. The captured methane would exceed the European Union’s total annual gas imports from Russia prior to the invasion of Ukraine.

In 2019 in Louisiana, oil and gas operators reported 5.1 billion cubic feet of methane wasted through venting and flaring, according to the U.S. Energy Information Administration. On a rough scale, that’s enough to provide electricity to about 121,000 homes for an entire year. 

Methane detection requires expensive infrared imaging equipment or satellite imagery. It’s unclear how much more is wasted through leaky valves, poorly sealed pipe threads and orphaned wells, but researchers have found numerous methane plumes bubbling up from offshore rigs

Earlier this year, the Louisiana Department of Natural Resources proposed a new state rule to prohibit routine venting and flaring of methane from production facilities. The proposed rule is still being finalized and has an “earliest effective date” of Jan. 20, 2024.

The Louisiana Budget Project’s Jan Moller said methane leaks are also a source of wasted tax revenue for the state. His organization monitors state government policy and its impact on low- to moderate-income families.

“Anyone who’s ever worked on a state budget can tell you that every dollar and every cent counts,” Moller said in a press release. “Reducing oil and gas methane emissions means not only are we breathing cleaner air, but we’re also protecting the millions of dollars in tax revenue lost every year due to methane wasted from leaks, venting, and flaring at oil and gas sites. That revenue has to be made up elsewhere through other taxes or cuts to critical state programs and services. There’s a better way forward. The Environmental Protection Agency’s new methane rule is a strong step toward a more prosperous Louisiana, and we applaud the Administration for their work.”

The EPA’s new rule is part of a broader Biden administration effort to address climate change through a variety of avenues. One includes plugging of orphaned oil wells, ones that oil and gas companies have abandoned. 

It also marks a significant departure from previous EPA rules in that it targets existing emissions rather than future expected emissions. 

The rule will work in coordination with a methane fee Congress passed in 2022 that will charge energy producers that exceed a certain level of emissions. The fee will take effect after Jan. 1.

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