Comments on Program Due September 1
The Environmental Protection Agency (EPA) has proposed a voluntary Natural Gas STAR Methane Challenge Program, through which oil and natural gas companies can make and track commitments to reduce methane emissions. The proposed challenge, which the EPA released on July 23, builds on the EPA's Gas STAR Gold framework and seeks additional ambitious methane reductions. Although the EPA acknowledges that "tremendous progress" has been made during the last 20 years as a result of the Natural Gas STAR Program, the agency believes that "significant opportunities remain to reduce methane emissions, improve air quality and capture and monetize this valuable energy resource."
Industry groups as such as the America's Natural Gas Alliance (ANGA) are reviewing the proposed program to see how it would work in tandem with existing and upcoming regulations, but these groups also note that the industry has already cut methane emissions from production activities by 38 percent since 2005.
Although the EPA acknowledges progress, the agency states that this challenge has "the capability to comprehensively and transparently reduce emissions and realize significant voluntary reductions in a quick, flexible, cost-effective way." This Methane Challenge Program is a part of the Obama Administration's broad spectrum plan for the oil and natural gas industry to cut methane emissions from new and modified sources by 40 to 45 percent below 2012 levels by 2025. Environmental groups are calling for these and other measures to be issued in the form of binding regulations.
The program would invite companies with operations throughout the natural gas value chain and in onshore oil production to commit to action under the challenge. The EPA would have three primary criteria for recognizing companies as partners under the program; company commitments should (1) be ambitious and achieve meaningful methane reductions across company operations; (2) be transparent with the ability to track and account for progress, and (3) demonstrate continuous improvement over time.
The EPA is proposing that companies participating in the Methane Challenge choose from two options to reduce methane emissions from their operations:
- Best Management Practice (BMP) Commitment, which is intended to drive near-term, widespread implementation of methane mitigation activities from key methane emission sources; and/or
- One Future Emissions Intensity Commitment, an existing industry-led partnership through which companies make ambitious commitments to achieve methane emission intensity targets based on sector-specific emission rates.
As part of their commitment, companies would enter into agreements (via a Memorandum of Understanding) with the EPA and track their progress through a transparent public mechanism, such as the existing Greenhouse Gas Reporting Program under Subpart W.
However, a review of the proposed program reveals many problems and raises many questions. For example, it is not clear what the benchmark for success is or how the program will differentiate between voluntary reductions and those mandated by law. In addition, the BMPs are not clearly defined and there is no understanding of how EPA will recognize companies and provide appropriate incentives for participation.
The industry is rightfully cautious and skeptical about whether options proposed are workable, especially with the prior reductions that have already been achieved. The industry notes that it is already incentivized to reduce and capture methane because of the economic value of doing so. There also is concern that these voluntary measures will be a springboard for more stringent mandatory regulations, whether issued by the EPA, states or as a result of lawsuits brought by environmental groups that have long sought binding requirements.
It is important for the industry to carefully review and provide comments. The EPA is taking comments through September 1, 2015 on ALL aspects of the proposed program and is planning to move fast to finalize the program. The agency intends to launch the Methane Challenge Program later in 2015, possibly in conjunction with the next Natural Gas STAR Annual Implementation Workshop in November.