The Biden administration released a long-awaited update to proposed methane emissions regulations for new and existing oil and natural gas wells that would require routine leak monitoring, seek to curb flaring, and create a new definition for "super-emitting events."

The U.S. Environmental Protection Agency on Nov. 11 released a supplemental proposal that revises its initial November 2021 plan for regulating oil and gas production sites, the largest industrial source of U.S. methane emissions. The new proposal incorporates feedback collected from 470,000 public comments, public hearings and consultations with tribal councils.

EPA estimated the proposal would cut methane emissions from covered sources by 87% below 2005 levels in 2030 alone, compared to a 74% reduction from its initial proposal. The agency projected it would create total net benefits of $34 billion to $36 billion from 2023 to 2035, with compliance costs of $19 billion at a 3% discount rate over the same period.

Tackling methane is a priority for the Biden administration because it traps 80 times more heat than carbon dioxide over a 20-year period. Methane is responsible for about a third of warming from greenhouse gases, according to EPA.

"The United States is once again a global leader in confronting the climate crisis, and we must lead by example when it comes to tackling methane pollution — one of the biggest drivers of climate change," EPA Administrator Michael Regan said in a Nov. 11 press release.

EPA released the supplemental proposal along with a slate of new climate initiatives announced by the administration at the COP27 climate summit in Sharm el-Sheikh, Egypt.

Leak monitoring in focus

EPA revised its November 2021 proposal for routine leak monitoring at well sites and compressor stations in a bid to "make it simpler for owners and operators to determine which monitoring requirements they must meet," according to a Nov. 11 fact sheet.

The type and amount of equipment used at a production site will determine leak monitoring requirements, rather than estimated emissions as originally proposed. The requirements will differ for small well sites, wellhead-only sites, sites with major production and processing equipment, and sites on Alaska's North Slope. The new proposal also dropped exemptions for well sites with lower emissions, meaning sites of all sizes would be subject to the rule.

The proposal additionally allowed operators to use a greater variety of advanced methane leak detection technologies. EPA said the change received "overwhelming support" in public comments and would "encourage continued innovation in advanced and low-cost methane detection technologies."

The supplemental proposal would require monitoring to continue at abandoned sites until the operator has plugged all wells and removed all equipment. Owners would have to submit well closure plans and conduct a final survey certifying that no emissions were detected.

EPA also proposed a definition for super-emitting events and regulations for addressing them. EPA would define a super-emitting event as emissions of 100 kg, or 220.5 pounds, or more of methane released per hour. Owners would have to conduct an analysis to determine the cause of a super-emitting event within five days of receiving notice from a regulator or qualified, EPA-approved third party that such an event has occurred.

The provision is meant to address research that indicates that emissions from a limited number of oil and gas sites account for as much as half of the sector's methane emissions, as well as substantial smog-forming volatile organic compounds and air toxics.

EPA seeks to reduce flaring

The supplemental proposal would add compliance requirements for the practice of burning off excess gas from oil production, known as flaring. Additionally, flaring would only be allowed if the owner certifies that the gas cannot be injected into a pipeline for sale or that there are technical or safety barriers to using the gas as on-site fuel or for reinjection into wells for enhanced oil recovery or some other beneficial use.

EPA also proposed a zero-emissions standard for pneumatic pumps. That means operators could not combust gas to drive pumps unless the site does not have access to electric power and the owner can certify that it is not technically feasible to use non-gas-driven pumps.

For the first time, the agency would regulate new and existing dry seal compressors, which are widely used in gas production and transmission.

EPA expects to issue a final rule in 2023. Comments on the supplemental proposal are due by Feb. 13, 2023. EPA scheduled a virtual public hearing on the proposal for Jan. 10-11, 2023.

S&P Global Commodity Insights produces content for distribution on S&P Capital IQ Pro.