The politics of natural gas are again heating up as President-elect Donald Trump prepares for his second term, while domestic and international demand for U.S. gas keeps growing and Ukraine has blocked Russian gas from Europe. But things may be different than when Trump reversed a methane reduction rule nearly eight years ago.
In fact, rolling back the current EPA methane rule will be more risky for the industry this time around. Methane mitigation has now become the key metric not just for climate protection but for the long-term sustainability of natural gas, with consumers in the U.S., EU and other major markets favoring gas with lower emissions.
As a result, the U.S. gas industry is now putting substantial resources into methane reductions. And many gas companies appear to support keeping the methane rule in place, according to new reporting by the Associated Press.
Leading expert Arvind Ravikumar at University of Texas notes industry support for methane emissions reductions have grown since Trump’s last administration. “There’s a whole ecosystem of industry catering to addressing methane emissions, and the technologies from 2016 have significantly improved and are now being routinely deployed across the country by many oil and gas operators, both big and small.”
Current regulations call for gas operators to end “flaring”—the wasteful practice of burning off excess gas rather than capturing it for productive use. And new rules require companies to identify and fix equipment leaking methane, actions companies are increasingly taking.
Recent studies find that producers are now cutting methane emissions from the top gas-producing Permian Basin in Texas substantially in response to the new methane regulations. A new report by S&P Global notes that fugitive emissions of methane from gas production in the Permian fell by a surprisingly large 26 per cent in 2023 alone. The second largest U.S. gas producing area, the Marcellus shale region primarily in Pennsylvania, already has far lower methane emissions than the Permian according to a major independent study released last year.
Now even Texas, which has long lacked methane regulations, is considering new action, given that gas from Texas has higher methane emissions than not just Pennsylvania but also New Mexico and other neighboring gas producing states. The Lone Star state’s implementation of the existing methane rule could change that, but only if the federal rule remains in place. In essence, challenging methane regulations could undermine the credibility of Texas gas even as Permian emissions are being reduced.
This movement by the industry toward support for methane mitigation also comes against the backdrop of a new reportfrom the Biden Administration’s Department of Energy claiming that U.S. gas imports would displace more renewable energy abroad than coal or gas. The DOE report will continue to be put pressure on the gas industry to cut emissions, but other studies call some of its findings into question.
An ICF report found that without U.S. LNG in 2022, the world would have produced 112 million more tons of greenhouse gas emissions from coal, oil and higher emitting gas. Other studies, like one from the Berkeley Research Group, found that U.S. LNG had 29% lower emissions compared to piped gas supplies from Russia to the EU.
The need to reduce emissions has prompted ExxonMobil to announce unprecedentedly large investments in new natural gas power plant technologies that would capture 90% of the carbon dioxide emissions. A new study from S&P Globalfinds that gas has provided large economic benefits to the United States, including from LNG exports.
Brand new guidance around hydrogen power incentives allows methane that would otherwise be emitted from landfills, coal mines, and farms to gain tax credits for use in hydrogen production. The guidance also could allow differentiated methane emissions rate reporting, which will more clearly indicate regions of higher or lower methane emissions. But many hydrogen investors believe the Biden Administration rules will unnecessarily prevent rapid development of hydrogen by too stringently limiting natural gas use as a catalyst fuel, an issue the incoming Trump Administration may revisit.
Meanwhile, the EPA estimates that implementation of the current methane rule would eliminate 58 million tons of methane emissions nationally by 2038, yielding net health benefits worth up to $98 billion over that period. And mitigating methane can be done at low net cost for gas companies, with 40% reductions done at zero cost since gas not allowed to escape through fugitive emissions can be profitably sold.
It seems clear that the new Congress will likely attempt to use the Congressional Review Act to overturn the methane pricing “feebate” provisions included in the Inflation Reduction Act in 2022. But the question remains will the separate EPA methane rule remain in effect. Even if the Trump Administration attempts to overturn the regulation, it would likely be subject to court battles that could take years to resolve.
More broadly, it doesn’t seem in the industry interest--or the U.S. interest--to eliminate the methane rule. For one thing, the EU will soon begin phasing in regulations of the methane content of imported natural gas, requiring the U.S. to prove low emissions to access its key gas export market.
And domestic demand for gas is growing, too. Government projections show that U.S. electricity demand is expected to grow by nearly 5% over the next five years, and is forecast to double over the next 25 years, with natural gas demand increasing to help meet the need. To meet consumer and investor expectations, the U.S. gas industry will need to lower emissions even as it produces more gas. Limiting methane is the cheapest way to do so.
This is part of a growing trend in which U.S. industry is trying to avoid positions on climate change that alienate consumers and new markets at home and around the world. With those concerns in mind, retaining the methane rule seems like just smart U.S.-first energy policy.
