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Trump Rollback of Methane Regulations Splits Energy Industry -- 2nd Update

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08/29/2019 | 01:51pm EDT

By Bradley Olson and Christopher M. Matthews

The Trump administration's move to roll back regulations on methane has divided the energy industry, with large companies saying restrictions are crucial to curtail leaks of the potent greenhouse gas and smaller producers calling them too costly.

Many of the world's biggest energy companies expressed disappointment with the Trump administration's decision to erase rules that sought to limit leaks of methane from oil-and-gas operations.

Energy giants such as Exxon Mobil Corp., Royal Dutch Shell PLC and BP PLC have made big bets on producing natural gas and selling it around the globe. Emissions of methane, the primary component of natural gas, undermine their sales pitch that gas is a cleaner fossil fuel.

"We have to reduce methane emissions for natural gas to realize its full potential in our energy mix," said BP America Chairman and President Susan Dio. "Simply, the more gas we keep in our pipes and equipment, the more we can provide to the market -- and the faster we can all move toward a lower-carbon future," she added.

But many independent oil-and-gas producers, such as billionaire Harold Hamm, chief executive of Continental Resources Inc. and a supporter of Mr. Trump, have opposed federal methane regulation. The companies say the rules are unnecessary because the industry is already taking voluntary actions and the costs of the federal mandates would weigh heavily on smaller and midsize producers.

Some producers have also expressed concern that limits on venting natural gas, as well as burning it, known as flaring, could lead to a slowdown in oil output, since gas is often a byproduct of oil production.

The American Petroleum Institute, an industry trade group, pushed the Trump administration to roll back the Obama-era requirements, which would force the industry to install equipment that can better monitor and limit leaks from new drilling activity, as well as perform more frequent inspections.

The Independent Petroleum Association of America endorsed the Trump administration's decision, noting that companies would still be subject to regulation of traditional pollution sources from oil-and-gas facilities.

"However, the hundreds of thousands of existing, small business-owned low-production wells wouldn't be subject to inappropriate regulations that arise from a methane rule triggered by a little-understood section of the Clean Air Act," said IPAA Executive Vice President Lee Fuller.

For smaller companies, particularly those operating older, low-producing wells, the cost of the regulations would be significant, Mr. Fuller said. An average, low-producing natural gas well in Pennsylvania might earn only $9 a day, after expenses, he said. The IPAA estimates the regulatory cost for such a well could be as much as $10 a day.

The proposed plan to do away with the rules is likely to set off a prolonged legal battle as environmental groups take steps to oppose the action, further delaying potential rules.

Many large oil-and-gas producers say they now support federal methane regulation, and are also increasingly vowing to voluntarily reduce their emissions, which come from intentional discharges as well as from leaks at well sites, pipelines and storage facilities. Chevron Corp., Exxon, BP and Shell are among the companies that have set targets for reducing emissions. Some companies have even made the goals a part of executive compensation packages

In the U.S. alone, methane that leaks or is released from oil-and-gas operations annually is equivalent to the greenhouse gas emissions of more than 69 million cars, according to a Wall Street Journal analysis.

Some large companies said they would continue to advocate for regulations. An Exxon spokesman noted that the company had announced support for direct regulation of methane emissions last year and said it would urge the Environmental Protection Agency to retain the main features of the existing rule.

"Shell has long supported the direct regulation of methane when regulation is efficient, effective and encourages innovation," said Shell U.S. President Gretchen Watkins. "We believe sound environmental policies are foundational to the vital role natural gas can play in the energy transition and have made clear our support of 2016 law to regulate methane."

Write to Bradley Olson at Bradley.Olson@wsj.com and Christopher M. Matthews at christopher.matthews@wsj.com

Corrections & Amplifications

This item was corrected at 9:26 p.m. ET to reflect that the The Independent Petroleum Association of America has endorsed the Trump administration's decision on methane regulations. The original version incorrectly referred to the group as the Independent Petroleum Producers of America.

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BP PLC -1.45% 517 Delayed Quote.5.78%
ROYAL DUTCH SHELL 0.06% 26.345 Delayed Quote.2.63%
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