2016 Archives

Tougher Methane Regulations: A Solution In Search Of A Problem

Excerpt

The following by Bernard Weinstein is from the April 8, 2016, edition of Investor's Business Daily. Weinstein is an economist and associate director of SMU's Maguire Energy Institute.

April 18, 2016

Contrary to his “all of the above” energy strategy announced several years ago, President Barack Obama has now jumped on the “keep it in the ground” bandwagon that is currently being voiced by most of his environmental constituency. In recent months he has vetoed the Keystone Pipeline, put limits on coal development on federally-owned land and yanked the Atlantic offshore leasing program — all in the name of combating climate change.

Then several weeks ago, the administration declared it would soon push regulations to control methane emissions from the oil and gas industry for the first time.  As a follow-up, the Environmental Protection Agency (EPA) has initiated a formal process requiring energy companies to provide information on methane releases from oil and gas drilling, transmission, processing and storage. These new regulations are on top of a recent EPA rule that requires producers to upgrade equipment and reduce methane leaks on new and modified wells.

Even though methane accounts for less than 10% of greenhouse gas emissions (GHGs) in the U.S., the White House justifies its new regulations by arguing that methane traps 50 to 75 times as much heat as carbon dioxide in the atmosphere over a 20-year period, thereby contributing significantly to human-induced global warming. This may be the case. But “declaring war” on energy-related methane releases will do little or nothing to reduce overall greenhouse gas emissions.

In the first place, methane releases from the oil and gas industry represent only about 3.4% of all U.S.-emitted greenhouse gases, which in total are lower today than they were 20 years ago. Furthermore, the oil and gas industry and the states have already taken steps to significantly reduce releases at well sites, as evidenced by the fact that total U.S. methane emissions have dropped 15% since 1990, even as natural gas production, of which methane is the principal component, has nearly doubled.

Globally, methane emissions are increasing. But a just-released study by the National Oceanic and Atmospheric Administration (NOAA) finds that “the U.S. energy industry contributes little to the overall burden of global fossil fuel emissions.” Rather, according to NOAA, wetlands and agriculture are the culprits.

Studies by National Economic Research Associates (NERA) and other energy researchers are challenging assertions by the EPA that reducing methane leaks 45% by 2025, which is the current proposal, will benefit the climate to the same degree as shuttering one-third of the world’s coal-fired power plants. NERA concludes that the alleged benefits of its methane rules are “highly uncertain and very likely overstated,” while an analysis by Energy in Depth finds that the rule would reduce global warming by a mere 0.004 degrees Celsius. Put differently, we could shut-in all American oil and gas production, and the impact on climate change would be virtually zero.

Regulation is never cost-free, and the new methane rules are no exception. With oil and gas prices at 10-year lows, producers and service companies laying off tens of thousands of workers, and bankruptcies rising, does it make sense to increase the cost of staying in business?

What’s more, the huge increase in America’s natural gas production over the past decade has actually been a net-plus for the environment. For example, the Intergovernmental Panel on Climate Change recently observed that an “increased and diversified gas supply is an important reason for a reduction of GHG emissions in the United States,” while the International Energy Agency (IEA) has observed that natural gas is a “valuable component of a gradually decarbonizing electricity and energy system.”

If its goal is to fight global warming, the administration is beating the wrong horse with its new methane reduction rules. More importantly, energy policies and regulations should not be driven by environmental alarmists, which is clearly the case today, but rather by sound science and careful cost-benefit assessments.