‘No Brainer’ Methane Rule Touts New EPA Approach to Carbon Costs

A new supplemental rule that would strengthen oil and gas methane standards puts added pressure on companies with leaky wells, using a new estimate of the economic costs of carbon dioxide that’s significantly higher than the White House’s temporary social cost of carbon metric.

President Joe Biden touted the new proposed rule on Nov. 11 at the United Nations’ COP27 climate summit in Sharm el-Sheikh, Egypt, tightening up methane standards from oil and gas wells that environmentalists have criticized as too weak to address an outsize source of greenhouse gas pollution.

The methane proposal is a “no-brainer,” according to University of Denver law professor Wyatt Sassman, but better monitoring of the extent of leaks is a crucial next step towards really moving the dial on emissions.

“Nobody really has a great handle on the problem; it’s like regulating with a blindfold when you don’t know where the emissions are, how bad the emissions are themselves, and so monitoring is such a central component of that,” Sassman said.

The EPA’s plan includes detailed rationale for much higher social cost of carbon estimates—and slightly higher social cost of methane figures—in a separate analysis that could bolster stronger regulations to curb greenhouse gas emissions.

That analysis, which will be subject to public comment and peer review by an outside panel of experts, is expected to be given significant attention by the Biden administration as it works to finalize a social cost of carbon for federal agencies to use, currently set at $51 per ton.

‘Extra Careful’

The broader methane proposal, set to be finalized in 2023, would tighten leak requirements for abandoned and low-producing oil and gas wells and requires responding to high-volume leaks reported by third parties as part of a “Super-Emitter Response Program.”

Green groups and lawmakers hailed the EPA’s move, which would update and strengthen a methane oil and gas rule proposed in November 2021.

“This action, paired with the methane emissions reduction program in the Inflation Reduction Act, will make a dramatic cut in our nation’s methane emissions and better position the United States to continue leading the world toward a cleaner, healthier future,” Sen. Tom Carper (D-Del.) said in a statement.

Though the supplemental proposal can add time to the process, the benefits of stronger curbs on emissions outweigh a lengthier timeline, according to Center for Progressive Reform senior analyst James Goodwin.

The rule will likely get resistance by smaller oil and gas companies, but the text shows that the agency is “mindful of defending the rule before skeptical judges,” Goodwin said. “They’re being extra careful with following all the procedural requirements.”

The new standards add to a suite of methane provisions included in the Inflation Reduction Act, Democrats’ climate-and-tax measure signed into law in August (Public Law 117-169), which includes a methane penalty fee alongside millions in incentives.

“As we review the details of the proposal, we are particularly interested in how it will interact with the methane fee provisions of the Inflation Reduction Act,” U.S. Chamber’s Global Energy Institute President Marty Durbin said in a statement.

The American Exploration and Production Council, representing companies pledging to drive down methane emissions from upstream operations, said it is still digesting the details but that the supplementary EPA proposal seemed to incorporate at least some of its recommendations and clarifying language.

But AXPC still has “concerns that should be addressed to make key provisions truly workable,” said AXPC CEO Anne Bradbury.

In conjunction with the climate law, the EPA predicts the supplement will “reduce an estimated 36 million tons of methane emissions from 2023 to 2035, the equivalent of 810 million metric tons of carbon dioxide.”

Carbon Cost Revision

The EPA detailed its new approach to estimating costs imposed by greenhouse gas emissions in a 137-page draft report issued alongside the proposed methane regulations.

The approach concludes that the social cost of carbon should be $190 per ton—nearly four times higher than the $51 interim figure the administration currently uses, according to EPA’s Draft Report on the Social Cost of Greenhouse Gases. It pegs methane at $1,600 per ton, only slightly raising it from the current $1,500 per ton figure.

Social costs of greenhouse gas emissions account for the broad costs of climate impacts imposed by each ton of the planet-warming emissions, which in turn can justify stronger regulations that curb emissions.

EPA’s new approach is significant, as it is the first federal agency to offer an updated approach for estimating the costs emissions imposed on society since Biden called for an updating of the cost estimates in a January 2021 executive order.

A White House interagency panel charged with finalizing the number is now roughly 10 months behind the deadline Biden set for unveiling a final figure.

By the Numbers

EPA said its update is responding to the National Academies’ 2017 report recommendations to update the analysis to better reflect the recent scientific literature. The figures account for the costs of a ton of planet-warming emissions on everything from human mortality to sea level rise and labor productivity.

EPA’s new approach also concludes the $190 per ton carbon cost figure would climb to $410 in 2080, calculated using a 2% discount rate, which weighs the dollar value of future impacts against the value of those impacts experienced today.

The $190 a ton carbon cost estimate is close to the figure recommended in September by the Resources for the Future think tank following a multi-year study.

“Their report draws very heavily on our work,” Brian Prest, director of RFF’s Social Cost of Carbon Initiative, said in an interview. EPA’s new approach also draws significantly from other recent work, including modeling done by the Climate Impact Lab.

The updated approach “is fully responsive” to various recommendations by the National Academies, and its efforts to make its analysis transparent “represents an important step forward for transparency and open science,” Prest wrote in a Nov. 15 blog post co-authored by RFF fellow Kevin Rennert.