EPA issued a long-awaited statement today on its intentions to reduce methane emissions from the oil and gas extraction, processing and transmission sectors 40-45 percent of 2012 emissions by 2025.
While EPA had begun to tackle emissions from new wells, and plans to continue down this road in the future (albeit by regulating methane directly rather than as an ancillary benefit), the much awaited aspect of today’s statement addresses existing wells.
EPA plans to issue guidelines and “ready to adopt control measures” for states to add to their State Implementation Plans for reducing VOC emissions in ozone non-attainment areas and in the Ozone Transport Region (the states east of the Mississippi River). Thus, as previously for new sources, methane emission reductions will come about as an ancillary benefit of VOC reductions. This is a reasonable start, but rural areas in western states, where much of the oil and gas activities occur, would not be included in these requirements.
There are other important aspects of today’s announcement. First, EPA plans to “explore potential regulatory opportunities” in methane monitoring and measurement technologies to help undergird its GHG emissions reporting system (and also will work with industry in their own voluntary efforts to better monitor, report and verify methane emissions). These steps are very important. We would counsel that efforts to actually measure the amount of methane leakage needs to be developed rather than just leak detectors.
Second, BLM has agreed to update its methane standards around flaring, venting and leaking, in coordination with EPA. Our earlier analysis of BLM proposed standards applying to oil and gas extraction of federal lands revealed that, in general, the revised standards were weak compared to what many states were doing. Thus, coordination with EPA is a positive development.
Third, EPA plans to work with industry “to develop and verify robust [but voluntary] commitments to reduce methane emissions.” EPA mentions several voluntary efforts, including One Future, which among many activities is examining the potential for a market-based approach for reducing methane, something RFF is looking into as well. EPA recognizes that these voluntary actions could “reduce the need” for future regulation, but is careful not to say that voluntary efforts substitute for regulations. This distinction is very important. Industry rightly says that it is in its interest to control leaks, since its product is going up, literally, in smoke. Yet, some types of leaks are cheap to fix relative to the value of the product lost and others are expensive. Industry cannot be expected to fix expensive leaks without being forced to by regulation. What will remain unclear for some time is whether further reductions beyond the cheap stuff are really necessary to meet emissions reduction goals for this sector. Our point would be that any pain inflicted should be minimized through cost-effective policy design.