Rolling Back Obama’s Methane Rules May Give Trump A Bump But It Could Burn Natural Gas

The Trump administration has, ironically, just bucked the wishes Big Oil by acting today to roll back regulations on methane emissions — the most potent greenhouse gas emission of them all.

The move is political as much as it is ideological: smaller oil and gas producers have been struggling long before the coronavirus hit and as such, they have been clamoring for regulatory relief. At the same time, unconventional oil and gas production is big in two key battleground states this November: Texas and Pennsylvania. And anything that Trump can do to accentuate the differences between himself and Joe Biden could help him in those states. 

But the move also comes with risks. Companies such as BP, Exxon Mobil Corp.
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and Royal Dutch Shell have already made major investments to capture escaping methane from their pipes and drilling equipment — money that has earned them positive PR and potentially even greater profits. For starters, the methane can be resold and used in the manufacturing and chemical processes. Even more compelling is that those energy producers are banking big on natural gas — a fuel that has about half the carbon content as does coal. But loose methane, which is 80% more potent than CO2, could block the path forward.  

“Our federal methane safeguards have been in place since 2016, protecting Americans from unhealthy and climate-damaging pollution, says Environmental Defense Fund lead attorney Peter Zalzal, in a statement. “Eliminating these safeguards would ignore the overwhelming body of scientific evidence documenting the urgent need to reduce methane pollution. And it is also starkly at odds with the broad and diverse set of stakeholders — including some major oil and gas producing companies — that support retaining and strengthening methane safeguards.”

The methane rule is part of President Obama’s legacy. He saw natural gas as an essential bridge fuel before renewables could takeover but also as a fuel that would not reach its potential without environmental safeguards. Obama’s goal was to cut the level of methane gas emissions by 40%-45% by the year 2025, from 2012 levels — a policy backed by Biden. If escaping natural gas could be captured and resold, industry could increase its revenues by as much as $188 million a year. ICF International
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agrees, saying that oil and gas companies could cut their emissions by 40% below the projected 2018 levels.

Deep Pocket Advantage

The Trump administration said that not only has the compliance cost been too high. But the regulations have also been unnecessary: that is, the Environmental Protection Agency had issued a report showing that methane emissions from all petroleum systems decreased by over 28 percent since 1990. EPA attributed this improvement to decreases in emissions from associated gas venting and flaring.

Meantime, the Western Energy Alliance has been spearheading the charge to undo the Obama-era rules, calling them laden with red tape. It also says that the industry is voluntarily taking steps to reduce methane emissions — that they have fallen 40% in recent years, even though natural gas usage has shot way up.

Its members include the former Encana Corp. (now Ovintiv) and Halliburton Co.
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, which have been accused of spoiling drinking water supplies in Wyoming and Oklahoma, respectively.

The concerns among the smaller, independent shale-gas frackers is real: The Sightline Institute along with the Institute for Energy Economics and Financial Analysis investigated and found that there is an “alarming volume of red ink.” From 2010 through early 2019, the 29 fracking-focused oil and gas companies they surveyed racked up aggregate negative cash flows of $184 billion — similar to what the International Energy Agency found: $200 billion negative free cash flows between 2010 and 2014.

If they can’t hang on, then that leaves this potentially lucrative business venture to those with deep pockets: BP, Exxon and Shell.

It’s hard to see how the loosening of the methane rules will stick. If Biden knocks off Trump in November and the Democrats get control of the U.S. Senate, the new rule can be reversed with a simple majority because it is coming too late in Trump’s term. And if Trump pulls off a miraculous upset in November — given the state of the election today — the environmentalists will challenge the rewritten regulation in court. Most of those cases are decided by a DC-federal appeals court that often sides environmental precedent.

“We will see EPA in court,” says David Doniger, director of climate and clean energy for the Natural Resources Defense Council. He says that the polling favors its position.

Politically, though, the move can only help Trump in key battleground states — anything to tip the scales in his favor. Critics counter that if the oil and gas sector has shortsighted views, it will burn its bridge to the energy future.

Indeed, it is in the self-interest of the oil-and-gas industry to cut leaks and to eliminate flaring — moves that will allow companies to capture lost product and to sell it in the market. Even with those incentives, however, a lot of natural gas is lost, which leads to higher methane levels. If the Obama-era rules are nixed, it not only fouls the environment but it also batters producers’ bottom lines. Big Oil gets that, which is why it is publicly opposing Trump on this one.