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Methane Reductions Sought by EPA Get Boost From Climate Deal

Aug. 3, 2022, 9:30 AM

The Democratic tax-and-climate economic package announced last week includes a suite of methane directives that are set to bolster the EPA’s regulatory plans to combat a leading source of planet-warming gases.

Legislation rolled out by Senate Majority Leader Chuck Schumer (D-N.Y.) and Sen. Joe Manchin (D-W.Va.) would carve out a historic $370 billion in funding and fees to promote clean energy. The measure also would include incentives to quell methane leaks that would complement upcoming Environmental Protection Agency standards for the oil and gas sector. The legislation may get a Senate vote as early as this week.

Attorney Darin Schroeder of the Clean Air Task Force said the package provisions capture more facets of industry than the proposed EPA rule alone—and does it more quickly. The EPA rule would cover production, processing, transmission, and storage.

The legislation’s methane section “applies to a bunch of sources outside of that scope, including offshore [liquefied natural gas] import and export terminals,” Schroeder said. “Just by that, we’re gonna get more methane reductions than I think we would under just an EPA rule.”

The provisions include a penalty fee for methane leaks as well as hundreds of millions of dollars of incentives for operators to monitor and quell their excess emissions. Outside of incentives, industry opposition on increased natural gas regulation is still possible.

“While there are some improved provisions in the spending package released last week, we oppose policies that increase taxes and discourage investment in America’s oil and natural gas,” Amanda Eversole, executive vice president and chief advocacy officer of the American Petroleum Institute, said in a statement.

For others, the deal marks a crystal-clear directive from Congress regarding EPA responsibility for methane, according to environmental consultant Jeremy Symons.

“Regulatory certainty and legal certainty benefit both the environment and the oil and gas industry itself,” he said. “Nobody benefits from wondering whether the ball is going to keep bouncing around.”

‘Low-Hanging Fruit’

Methane is a major source of planet-warming emissions, and the oil and gas sector releases millions of metric tons of the gas through leaks annually, according to the EPA—though environmentalists have found the rate is even higher than EPA’s estimates.

“Controlling methane emissions from the industry is absolutely essential for meeting Biden’s climate goals,” Earthjustice senior climate attorney Hana Vizcarra said. “It’s low-hanging fruit because you have the tech to do it, we need the right combination of incentives and regulation to make it happen.”

The Biden administration proposed a methane rule for the oil and gas sector under Section 111 of the Clean Air Act in November 2021 that expands reduction requirements for new sources. The rule is still in the works, and some advocates are pushing for more stringent requirements that capture emissions from smaller producers, who are often the worst source of leaks.

But for the most part, methane action both from EPA and within the spending package is founded in “industry-driven” goals that should be achievable, according to the Clean Air Task Force’s Schroeder. What remains to be seen is whether smaller producers also will be adequately captured.

Bigger oil and gas actors are already reducing methane emissions “because it makes good economic sense,” said James Goodwin, a senior policy analyst at the Center for Progressive Reform. When regulations kick in too, the idea would be to “force the smaller firms in the industry to meet up with them,” he said.

Limiting Factors

Some experts still have questions about some of the exemptions baked into the package, which could give some companies a break on fees if they are subject to permitting delays. The extent of EPA enforcement if the package is approved also remains to be seen.

Goodwin also worries that the methane-release thresholds for the provision’s applicable operators may be too high to capture smaller companies. Schroeder believes the thresholds are adequate, but noted that the only companies on the hook in the spending bill emit 25,000 tons per year of methane or more, “so that that itself is somewhat limiting.”

In order for the spending package to do its job in conjunction with a forthcoming rule, monitoring will also need to improve drastically, according to Symons, who noted that the EPA has historically undercounted methane emissions that have had “a much larger footprint” than official inventories tell us.

“We can’t map out a clear roadmap to get to the climate destination we need to get to if we don’t have a true accounting of the full impact of methane emissions from the gas sector,” Symons said.

Vizcarra agreed that for the fees laid out in the package to work, the EPA will need to “redouble its efforts on ensuring that the industry is reporting their emissions accurately.” The spending deal may complement rulemaking, “but it can’t replace strict regulation,” she added.

To contact the reporter on this story: Jennifer Hijazi in Washington at jhijazi@bloombergindustry.com

To contact the editor responsible for this story: Renee Schoof at rschoof@bloombergindustry.com