EPA’s 2016 Methane Rule: Should It Stay or Should it Go?

WASHINGTON—Shortly after taking office, President Trump signed an executive order requiring agencies to review existing regulations and other policies that could burden the development of energy. The order specifically named for review an Obama-era Environmental Protection Agency (EPA) regulation designed to reduce methane emissions. Methane is a powerful greenhouse gas, and the oil and gas sector is the largest source of methane emissions in the US. EPA under the Trump administration put in place a 90-day stay of parts of the rule; however, that stay was vacated by the District of Columbia Circuit Court of Appeals last summer, leaving the rule currently in effect but under a cloud of uncertainty. The agency has proposed a two-year stay of the same parts of the rule and is moving towards formal reconsideration of these parts of the rule.

In a new report, EPA’s 2016 Methane Rule: Should It Stay or Should it Go?, released today by Resources for the Future (RFF), researchers carefully analyze the costs and benefits of repealing or modifying this regulation. This report is part of a series of cost-benefit analyses of rules targeted by the Trump administration for possible repeal or modification. There is also an accompanying blog post on this study.

The authors—RFF’s Alan Krupnick, Justine Huetteman, and Art Fraas—replicated EPA’s original analysis and updated various inputs (like the price of natural gas) to generate a baseline of repealing the rule, which indicated that there would be net costs to society of repeal of $27 million and $152 million in 2020 and 2025, respectively. According to the authors, this estimation “suggests that the rule should be left in place, because the forgone benefits outweigh the cost savings associated with repeal.”

According to EPA’s regulatory analysis for delayed implementation of the rule, the present value of cost savings of the two-year stay (which would halt implementation of the rule in 2018 and 2019) is $280 million, which come primarily from the delay of monitoring and repair costs. The authors point out that there are forgone benefits from emissions that would have been avoided were the rule in effect during these two years, which the Trump administration values at just $37 million. The reason for the low valuation is that the administration used a domestic social cost of methane (SCM) rather than the global SCM used by the Obama administration.

The authors estimate that by using the global SCM, the delay would have net social costs of $18 million, discounted at 3 percent. On the other hand, using a 7 percent discount rate with the global SCM, the delay would have net benefits of $195 million.

The authors conclude that, “Ultimately, whether it makes economic sense to repeal this rule depends on the valuation of methane emissions reductions. Given the uncertainty over which figure to use, it would be useful for the Trump administration to provide a full and transparent range of estimates to best inform the public about the potential impacts of delaying or repealing the rule.”

The goal of RFF's studies is to estimate the potential impacts on industry and the public if the regulations are eliminated, modified, or delayed.

Read the full report: EPA’s 2016 Methane Rule: Should It Stay or Should It Go?

Read the new blog post: Assessing Changes to EPA’s 2016 Rule to Limit Methane Emissions.

Read previous reports from this series:

The 2016 Blowout Preventer Systems and Well Control Rule: Should It Stay or Should It Go?
The 2016 BLM Methane Waste Prevention Rule: Should It Stay or Should It Go?

Other reports coming up in this series:

• The Pipeline and Hazardous Materials Safety Administration’s (PHMSA’s) “Hazardous Materials: Enhanced Tank Car Standards and Operational Controls for High-Hazard Flammable Trains” rule,
• BSEE and the Bureau of Ocean Energy Management’s “Oil and Gas and Sulphur Operations on the Outer Continental Shelf—Requirements for Exploratory Drilling on the Arctic Outer Continental Shelf” rule, and
• PHMSA’s “Pipeline Safety: Integrity Management Program for Gas Distribution Pipelines” rule.