On March 28, the White House released a multi-pronged strategy to reduce methane emissions from a variety of sources, a step the administration says is an outgrowth of the President’s Climate Action Plan announced last year. Methane is a powerful greenhouse gas, about 20 times more potent than carbon dioxide. The federal government will target four key areas of methane emissions – landfills, coal mines, agriculture, and the oil and gas industry. The fact sheet indicates that the administration may release a flurry of regulations in the coming months across these sectors. According to the White House, 36% of methane emissions come from agriculture, 28% from natural gas, 18% from landfills, and 10% from coal mining.
For oil and gas drillers, the prospect of regulations on emissions from flaring and fugitive methane has been watched closely by both the industry and environmental groups for several years now. With little action to date from the federal government, steps to control methane have been left to the states. Colorado, for example, adopted the nation’s first standards on methane, with the help of the energy industry.
ValueWalk's Raul Panganiban interviews Kirk Du Plessis, Founder and CEO of Option Alpha, and discuss Option Alpha and his general approach to investing. Q1 2021 hedge fund letters, conferences and more The following is a computer generated transcript and may contain some errors. Interview with Option Alpha's Kirk Du Plessis
Oil and gas companies cite that methane emissions have actually declined by 11% since 1990, meaning there is little need to fix a problem that doesn’t exist. On the other hand, environmental groups point to the fact that methane emissions may actually be much higher than what is being currently measured, and in any case, they will rise significantly in the future if nothing is done. If methane emissions are higher than what shows up in the data, natural gas’ environmental benefit over coal may not be as big as many think.
The White House’s methane plan won’t have a huge impact on oil and gas drilling in the short-term. The White House says that the EPA will merely release a series of white papers this year on “potentially significant sources of methane in the oil and gas sector and solicit input from independent experts.” Then, by the fall, the administration will decide whether or not it wants to take further action. If the EPA does decide to pursue regulatory action, the White House will ensure that the rules are completed by the end of 2016, just before Obama leaves office.
However, regulations on flaring will come sooner. The Bureau of Land Management will propose standards on flaring, known as “Onshore Order 9,” later this year. BLM will also publish an Advanced Notice of Proposed Rulemaking in April to highlight its intent to find a solution to capturing methane from coal mines.
Beyond these steps, the Department of Energy will support the development of new technologies that can track, detect, monitor, and capture methane. DOE will do this through loan guarantees, and appropriations proposed in the President’s budget (which hasn’t been passed).
The methane plan from the White House is not exactly overwhelming, and the initial reactions from stakeholders indicate that, at least at this stage, it appears to be pretty innocuous (or vague enough so as not to anger any one constituency). “We all share the goal of a safe, resilient, clean energy infrastructure and natural gas utilities are working with state regulators and key stakeholders to do our part,” said Dave McCurdy, president and CEO of the American Gas Association, according to The Hill. Environmental groups indicated cautious support for the plan. “President Obama’s plan to reduce climate-disrupting methane pollution is an important step in reining in an out of control industry exempt from too many public health protections,” said Deborah Nardone of the Sierra Club. “However, even with the most rigorous methane controls and monitoring in place, we will still fall short of what is needed to fight climate disruption if we do not reduce our reliance on these dirty fossil fuels,” she added. As always, the devil will be in the details.
By Nicholas Cunningham of Oilprice.com