Popular EPA Methane Rule Comes with Cost, Monitoring Concerns

While climate advocates hail the EPA’s newly finalized actions to reduce methane emissions, some lawyers caution that the rule’s hefty price tag and monitoring response program leave it vulnerable to concerns about grid reliability and compliance challenges.

The Environmental Protection Agency released its highly anticipated methane standards for the oil and gas industry Dec. 2 at the COP28 summit in Dubai, a year after the agency proposed methane actions at Egypt’s 2022 COP summit.

The final 1,690-page action includes a gamut of reduction policies aimed at stemming methane leaks in the oil and gas sector. The action was widely popular among both advocates and some industry groups.

But for some, the rule’s projected costs for industry monitoring and control requirements seem steep compared to still-uncertain projected benefits.

“They’re saying the benefits far outweigh the costs,” according to Shannon Broome, partner at Hunton Andrews Kurth LLP. “The benefits number is very controversial, about how it was calculated, what went into it, discount rates.”

“People are generally in favor of methane regulation, but the details matter and that’s where I think you see some questioning,” Broome said.

Details Matter

The agency values the rule’s 80% methane reduction at "$97 to $98 billion dollars from 2024-2038,” according to a press release.

The EPA is beefing up monitoring requirements for well sites and compressor stations, as well as phasing out routine flaring and requiring emission mitigation in certain storage and pump equipment.

After a deluge of industry criticism, the agency also adjusted aspects of the Super Emitter Response Program, which was added in a supplemental action in 2022.

Many stakeholders balked at the idea that third parties could fill in methane monitoring gaps with little oversight, and EPA responded to those concerns with a specific vetting and oversight process for parties permitted to detect leaks.

“The EPA’s new methane rule is unusual in drawing support from industry members and the Environmental Defense Fund,” according to King & Spalding partner Peter Hsiao, who mentioned in an email that the cost of the program could come very close to its projected value.

The American Petroleum Institute said in a statement that it shared the administration’s methane reduction goals, but feasibility and grid reliability are still top concerns.

“To be truly effective, this rule must balance emissions reductions with the need to continue meeting rising energy demand,” said Dustin Meyer, API senior vice president of Policy, Economics and Regulatory Affairs. “We are reviewing the complex rule to ensure it meets that dual objective.”

Heavy Lift?

Not all companies will feel the expense of the rule equally, and it’s still “a heavy lift for companies to make such broad changes to capture and transport the climate superpollutant,” according to Rachael Jonassen, director of the Climate Change and Greenhouse Gas Management Program at George Washington University.

“It’s not uniformly, commercially viable” to tack on reduction technology, Jonassen said, adding that despite the potential setbacks, the rule is a “major advance” that is “well overdue.”

Methane is a highly potent greenhouse gas, which makes up one third of global warming emissions worldwide and is 28 times more potent that carbon dioxide, according to the EPA. Its release is also often accompanied by volatile organic compounds, and can have adverse short- and long-term health impacts.

Sources for methane are largely agricultural and industrial, and the Biden administration’s latest methane action targets the sometimes colossal leaks of methane from oil and gas wells.

Not everyone is happy with the added regulation. House Energy and Commerce Committee Chair Cathy McMorris Rodgers (R-Wash.) balked at the agency’s “rush-to-green” and its potential impacts on US energy demand.

“I’m deeply concerned these latest steps to enact additional burdensome regulations for methane could dramatically expand the agency’s regulatory reach in a manner that will stifle innovation, increase operational costs, and increase the price of energy,” McMorris Rodgers said.

For advocates, the rule is a success.

“This is a really important set of standards and we’re actually generally very enthusiastic about where the agency has landed,” Sierra Club attorney Andres Restrepo told other Clean Air Act experts at a Dec. 5 conference.

“This final rule very clearly satisfies the West Virginia test,” Restrepo added, referring to the landmark EPA authority case at the US Supreme Court, West Virginia v. EPA. “It doesn’t stop oil and gas development, but instead it reflects cost effective concepts, techniques for reducing emissions associated with it.”