The Obama administration today issued its highly anticipated limits on methane emissions from oil and gas wells that are even tougher than those it proposed last year. It is estimated that the costs to comply will be at least 25 percent higher than the proposed rule adding an estimated $530 million in additional costs in 2025.
The administration contends that methane is one of the most potent greenhouse gases and is a critical emission that the administration is focused on reducing as a part of meeting its GHG reduction goals in its Climate Action Plan. EPA has identified the oil and gas industry as the leading source of methane emissions. In this Climate Action Plan the administration seeks to reduce oil and gas sector methane emissions by as much as 45 percent from 2012 levels by 2025.
The new regulations apply immediately to new and modified wells and, in a change from last year’s proposal, include low-producing wells and more frequent site inspections. Under the rule, companies will have to upgrade pumps and compressors, while expanding the use of so-called “green completion” technology meant to capture the surge of gas that can spring out of newly fracked wells. These completion techniques have been required at new and modified natural gas wells since 2015, but this new rule would broaden the requirement to oil wells as well. Inspections are required four times a year for compressor stations instead of twice a year, as proposed. At wells and associated equipment, however, the agency stuck with a semiannual timetable. In addition, the EPA declined to finalize its proposed waiver for low-producing wells that generate less than 15 barrels per day of oil or its equivalent, which would have exempted thousands of wells each year from new leak detection requirements.
Although most of the requirements for new wells would apply immediately, energy companies have a year to submit leak detection and repair plans. Green completion technology will be required at new oil wells within six months, but energy companies would still be forced to reduce emissions at those sites in the meantime, including by burning excess gas.
The changes drew immediate criticism from the oil and gas sector, who had opposed the less stringent proposal as unnecessary in light of the industry’s prior and ongoing work to reduce methane emissions. This sector is self-incentivized to reduce methane as it is the primary ingredient in natural gas. As such, energy companies have a financial incentive to keep it bottled up as it moves from the wellhead to compressor stations and into storage tanks.
This new rule alone, however will not be enough to meet the methane reduction goal in the Climate Action Plan. As such, the EPA's next step will be to address air regulations for existing sources. President Obama confirmed this and promised the U.S. would go after existing oil and gas sources during a March summit with Canadian Prime Minister Justin Trudeau. EPA also formally started this process today by releasing a draft information collection requests that ask oil and gas companies to turn over data about emissions, pollution-reducing equipment and associated costs.