On May 5, Transportation Department’s Pipeline and Hazardous Materials Safety Administration (PHMSA) announced new rules aimed at reducing methane leaks from the domestic pipeline system it says could lower methane emissions by 1 million metric tons by 2030. PHMSA issued a proposed notice of rulemaking to reduce methane leaks from the country’s natural gas infrastructure, which includes 2.7 million miles of gas transmission, distribution, and gathering pipelines. It also would cover the nation’s 400 underground natural gas storage facilities and 165 liquefied natural gas facilities. The proposal would update leak detection and repair rules to require companies to use commercially available technologies to find and fix methane leaks from pipelines and other facilities. According to EPA, the transmission, storage and distribution of oil and gas accounts for roughly one-third of the sector’s emissions. The Biden administration is continuing its regulatory storm against domestic fossil energy sources like natural gas. The United States is the world’s largest natural gas producer and has been supplying gas to Europe as Russia has curtailed its gas supplies there due to sanctions that the West placed on Russia for its invasion of Ukraine.
PHMSA projects its proposal would cut emissions from the pipelines it regulates by as much as 55 percent. The proposal requires pipeline operators to establish advanced leak detection programs to detect and repair all gas leaks by strengthening leakage survey and patrolling requirements using technology such as aerial or vehicle surveys, optical gas imaging cameras, and continuous monitoring systems. It would require the use of advanced, but commercially available, technology to meet a minimum performance standard. The new rule also revises down the minimum reporting threshold to detect smaller leaks, seeks to prevent equipment failures, specifies criteria and timeframes for leak repairs and encourages operators to invest in methane-capture equipment.
Last month, the DOT began distributing $196 million in pipeline repair grants for 19 states. It was part of a five-year (2021 to 2026) $1-billion grant to rehabilitate public-owned natural gas pipelines listed in the 2021 Infrastructure Investment and Jobs Act. The funding is expected to cut methane emissions by about 212 metric tons annually.
Other Methane Regulations and Fees
The Interior Department’s Bureau of Land Management (BLM) proposes to tighten limits on gas flaring on federal land and requires energy companies to better detect methane leaks. The BLM rule would impose monthly limits on flaring on Federal lands and charge fees for flaring that exceeds those limits. The rule is expected to be finalized next year. The Environmental Protection Agency has a rule that covers methane emissions from new and existing oil and gas wells nationwide, including smaller drilling sites that will be required to find and plug methane leaks. The rule that expands to smaller sites is expected to be finalized this year.
The Inflation Reduction Act, passed last year by Congress, imposes a fee on all U.S. oil and natural gas production and the transportation and exportation of natural gas that exceed a certain level of methane emissions. The bill imposes a “waste emissions charge” for facilities reporting more than 25,000 metric tons of carbon dioxide equivalent greenhouse gas emissions annually. Using EPA’s assessment, that amount translates to about 1,000 metric tons of methane. The tax would be assessed on the production and gathering of oil and natural gas, and on the transmission, storage and exporting of natural gas using an initial cost factor of $900 per ton for 2024 emissions, $1,200 per ton for 2025 and $1,500 per ton for 2026 and each year after. This is also known as the “Methane Tax.”
Oil drillers usually flare (burn-off) natural gas produced as a byproduct to oil when they lack pipelines to move it to market or when prices are too low to make transporting it worthwhile. Other reasons to flare natural gas include safety concerns and connectivity issues. However, it is always in the best interest of an oil and gas producer to capture and sell the supplemental natural gas on the marketplace when at all possible, and that is what oil companies prefer to do in the United States. A study of the flaring of natural gas from wells in the United States by consultant Rystad Energy for the Environmental Defense Fund determined that infrastructure capacity limits are the greatest use of flaring gas that cannot be captured, but the Biden Administration is making it more difficult to build pipelines.
Conclusion
The Biden administration is attacking the oil and gas industry from several directions with its rules and legislation to reduce methane emissions. The latest is the Department of Transportation’s rule affecting methane leaks from pipelines, storage facilities and LNG plants. Besides Transportation, the Department of Interior and the Environmental Protection Agency also have rules affecting methane emissions. Further, the Inflation Reduction Act taxes methane emissions above a certain level beginning next year. Oil companies would prefer to sell the gas rather than flaring it, but are hampered by the lack of pipelines to do so. However, without permitting reform, those pipelines will not be built. Americans can expect higher energy prices as companies comply with these rules and taxes.
