Editor's note: Portions of this article have been clarified to differentiate L. Poe Leggette's comments about the Inflation Reduction Act and new methane regulations released by the Biden administration on Dec. 2.
PITTSBURGH — New methane regulations released Dec. 2 by the Biden administration at the COP28 U.N. climate summit will make business for many oil and gas producers more expensive and complicated, a longtime attorney for the energy industry said.
L. Poe Leggette, co-head of the energy team at Baker & Hostetler LLP, said on Dec. 5 that he anticipates various lawsuits "challenging the aspects of the law."
On Nov. 29, Leggette told the audience at Hart Energy’s DUG Appalachia Conference on Nov. 29 that the new rules would capture more producers for regulation and taxes, and that tracking methane emissions was a complicated and often inaccurate task.
The new methane regulations were approved by Congress as part of the Inflation Reduction Act (IRA) passed in August 2022. Part of the new regulations are scheduled to go into effect at the start of 2024.
The Biden administration announced the finalized version of the new regulations as part of an international pledge to reduce methane emissions globally. The EPA posted the new rules in a 1,690-page document on its web site after more than two years spent formulating the regulations.
At the conference, Leggette derided the proposed regulations prior to their release.
He also took aim at the IRA. “If you actually read through the statutory provision, you will say, ‘Wow, this reads like someone just threw this together at midnight the night the bill was passed. And the reason it looks that way is because that's what happened,'” he said.
As released on Dec. 2, the new policies ban routine flaring of natural gas produced by newly drilled oil wells; require companies to monitor for leaks from well sites and compressor stations; and include a monitoring program that requires third-party remote sensing to detect large methane releases from so-called "super emitters," the agency said in a statement. The EPA believes the rules will eliminate 58 million tons (MMton) of methane from reaching the atmosphere between 2024 and 2038.
The Energy Workforce and Technology Council said operators already have in place voluntary protocols and actively monitor and detect methane leaks in real time.
Energy Workforce President Tim Tarpley said the organization was concerned the rules allow “third-party emissions monitoring under the rule.”
“The federal government has taken unprecedented steps to allow potentially biased third parties to gather data and report emissions to the EPA,” he said in a Dec. 2 press release.
The regulations also implement a methane tax approved by Congress in 2022. The new tax kicks in when a facility emits more than 25,000 metric tons of carbon dioxide equivalent. The fees will begin at $900 per metric ton of methane emitted in 2024; will increase to $1,200 in 2025; and $1,500 in 2026.
Tarpley said the rules effectively levy new taxes on consumers.
“The implementation of a new tax on the oil and gas industry will directly impact the ability of Americans to obtain energy to fulfill daily needs, increasing the cost of oil and natural gas prices and decreasing domestic energy security,” he said.
Legette said the major issue now facing oil and gas producers are the new reporting requirements and the new tax burden determined by what the reporting data says.
“The EPA’s prime goal is ‘to expand reporting to include new emission sources in order to accurately reflect total methane emissions,’” Legette said. The definition of “facility” in the new rules has therefore broadened to count some sections of oil and gas production that had not been included or to combine facilities that were separate before.
“The result is that a company currently estimated to emit, say, 18,000 tons per year may — with no actual increase in emissions — now be estimated to emit more than 25,000 tons, making it subject to annual reporting,” Legette said.
The other difficulty is that measurement of methane emissions on any given site can vary wildly over time.
“Sometimes even if you are measuring [methane emissions] on an hourly basis,” Legette said. “I have, in my files back in Houston, [data that show] during a 17-day span one site had methane content vary from 72% to a little over 90%.”
For now, Legette said his legal term has been working with clients to plan for the EPA’s proposed changes.
Operators should examine measuring options that fit with their sites, he said, to come up with a “good-faith basis to start figuring out what their liability would be.”
Leggette works in litigation for the oil and gas industry and was honored by the Independent Petroleum Association of America in June for his business advocacy work with government regulations.
The EPA considers methane reduction a short-term solution to reduce greenhouse-gas emissions, as methane traps more than 25 times more heat than CO2. Methane is a short-lived pollutant, however, and breaks down in the atmosphere after about eight years. That compares to CO2, which can linger in the atmosphere for more than 100 years.
According to government estimates, the oil and gas industry emits 80 MMton of methane a year.
Following the announcement of the finalized law, several major oil and gas companies announced their acceptance of the new rules. Exxon Mobil’s CEO Darren Woods said his staff was reviewing the new regulations but was supportive as long as the rules were “reasonable,” Reuters reported.
EQT, the largest natural gas producer in the U.S., released a statement saying the company was supporting the action and was already undertaking “vigorous efforts to reduce methane emissions.”