A new climate change regulation is likely on the way from the Environmental Protection Agency (EPA) this January, targeting methane emissions from the oil and gas sector. While critics of climate regulations often complain that the costs of pollution controls are too high, directly regulating methane would buy time on climate change and redirect natural gas back into the supply chain, at little net cost, due to the commercial value of the captured gas. Moreover, the net cost to these companies would be outweighed by the social benefits of reducing the fugitive methane emissions.
Here's why this regulation is important:
The stakes are high. Methane, the primary component of natural gas, is a potent climate pollutant up to 86 times more powerful than carbon dioxide over a 20-year timeframe, and 34 times more powerful over 100 years.
The natural gas produced by hydraulic fracturing has transformed the national energy landscape. Despite New York's recent decision to ban hydraulic fracturing in the state, natural gas produces 27 percent of the electricity generated in the United States, and this percentage is rising. In addition to increasing energy efficiency and renewable energy, reducing the amount of methane that leaks into the atmosphere from the oil and natural gas sector is necessary to meet the nation's climate protection targets.
A new policy brief by New York University School of Law's Institute for Policy Integrity provides a primer on methane emissions from the oil and gas industry and discusses potential regulatory pathways that the EPA may use to limit emissions. (I am the lead author of the brief.) As the brief explains, existing technologies can capture large volumes of natural gas that currently escape into the atmosphere, providing scientific and economic benefits.
The oil and natural gas sector is the nation's largest industrial emitter of methane. The oil and natural gas sector releases 7.7 million metric tons of unburned methane each year — enough to heat 6.5 million U.S. homes.
The United States loses at least 1 to 3 percent of its total natural gas production each year when methane is leaked or vented to the atmosphere during the production, processing, transmission, storage and distribution of natural gas and oil.
Low-cost techniques exist to capture methane. Studies show that operators can reduce methane pollution from the oil and gas industry by nearly 50 percent, using available, low-cost measures like green completions (a technique that captures emissions at the start of well production), leak detection and repair, and better seals and equipment. Many of these techniques are described in a set of technical papers that the EPA released this spring.
Because of the commercial value of the natural gas that can be conserved by redirecting natural gas back to productive use, many of these measures have low net cost. Even without the resale value of natural gas, these measures can still be cost-benefit justified due to the social cost of methane emissions — the cost that an additional unit of emissions is projected to impose on society — as well as the health benefits of reduced smog and hazardous air pollutants, which are co-emitted with methane during oil and natural gas production.
State laws and voluntary measures are inadequate. Methane emissions are a global externality: Methane mixes in the atmosphere and has harmful climate effects across jurisdictions. Due to its international impacts, individual states will experience only a fraction of methane's harms, leading to an incentive to under-regulate. While some states like Wyoming and Colorado have addressed oil and gas air pollution, including Colorado's first-in-the-nation methane regulations, these states are outliers.
Voluntary measures, such as the EPA's Natural Gas STAR program, provide information on emission reduction techniques, but only a small number of companies participate. And because methane is an externality, most companies will not reduce all of the methane that is cost-benefit justified according to the social cost of methane, in the absence of regulation. Given the recent and projected growth of the natural gas and oil sector, federal regulation of new and existing sources is necessary to secure sharp reductions.
Clean Air Act Section 111 is the most promising reduction pathway. By setting methane emissions standards under Section 111 of the Clean Air Act, the EPA can reduce emissions at new and existing sources in the natural gas and oil sector by up to 48 percent. These standards would require the use of available, low-cost technology. They would build upon the EPA's 2012 regulations, which mainly addressed emissions from new natural gas wells, and not oil wells or existing sources. Moreover, Section 111 provides states with flexibility to regulate emissions through market-based programs, if they so choose.
Alternatively, the EPA could issue standards pursuant to Section 182 of the Clean Air Act, which would indirectly curb methane emissions by regulating smog-forming volatile organic compounds. However, such regulations would apply only in ozone non-attainment areas, limiting the efficacy of this pathway.
In short, a federal approach to regulating methane pursuant to Section 111 is a commonsense solution that complements the growing natural gas industry while curbing potent methane pollution.
Hein is the policy director at the Institute for Policy Integrity at New York University School of Law, focusing on climate change, energy and transportation issues.