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Methane Regulations: Pomp, Circumstance & Paris

Washington “Insighter”

During the week of March 7th the recently-elected Prime Minister of Canada, Justin Trudeau, visited Washington with all the pomp and circumstance that comes with a high-level visit.  An official welcoming ceremony, a joint press conference with President Obama, and a state dinner were all on the agenda.

The visit of a foreign head of government to Washington, DC generally brings with the announcement of some form of joint policy engagement between the United States and the visiting country.  Trudeau’s visit was no different.

This time it impacts the oil and gas industry.

On March 10th, Trudeau and Obama announced that the EPA, in coordination with Canadian environmental agencies, will develop regulations governing methane emissions from existing oil and gas production facilities.

This next round of methane rules comes on-top of regulations governing methane from new production facilities.  That regulation is already under development, with a final rule likely during the first half of 2016.

One would think that it would be difficult, if not impossible, for the Administration to get a rule this complex finalized before the end of President Obama’s term on January 20, 2017.

On that point, the EPA seems to be recognizing the realities of the calendar.  Instead of moving initially to put out a proposed regulation, the EPA instead announced that the first step towards a rule will be gathering “information on existing sources of methane emissions, technologies to reduce those emissions and the costs of those technologies in the production, gathering, processing, and transmission and storage segments of the oil and gas sector.”

Not only does the request have to go out, data supplied and analyzed before any decisions can be made, but all of it has to go through a bureaucratic approval process.

Even if EPA is ready to release a proposed rule by January 2017, it will be more than a year before such a regulation is finalized.  Which leads to a second thought: a new administration generally has the ability to stop progress on regulations started by their predecessor but still under development.

So a Republican White House could, potentially, halt this regulation if they chose to, right?

Well, the world of bureaucracy and international relations is not quite as simple as that.

The White House, the EPA, Canada, and every organization in favor of this new regulation – which could put a significant number of existing oil and gas wells out of business – have all been very clear that this proposal is tied to the recently signed Paris Climate Agreement.

By tying this regulation to an international agreement, even if it is not a treaty, it is much harder for a new Administration to simply halt the action at 12:01 PM on January 20, 2017.

PESA members, working with their partners in the operating and drilling community, have made great strides towards voluntary reductions in methane, even as US energy production has increased.

Will the EPA’s proposal reflect these efforts?  Will the proposal be performance based to ensure that innovation continues?  Will implementation timelines take into account that in many situations, solutions need to be engineered?

These are key technical questions that get to the heart of this proposal.  They certainly won’t be answered during a press conference or a black tie event.

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