API gives ground on methane as Biden officials review regulations

April 5, 2021

Acknowledging the political winds on climate issues and changing attitudes in the oil and gas industry, the American Petroleum Institute (API) Mar. 24 released a framework for addressing climate change that includes direct regulation of methane.

The trade group issued its ideas on greenhouse gas emission controls the same day that the Interior Department presided over a lengthy virtual forum for discussion of its oil and gas leasing program.

Interior officials mostly stuck to “listen mode” and avoided suggesting policy changes, according to industry participants. As a result, more curiosity may have been stirred by API’s ideas, which represented movement beyond the industry’s positions when the Obama administration was toughening regulations.

Now, API agrees with the overall objectives of the Biden administration on methane control and is committed to working with the administration on those goals, said Frank Macchiarola, the trade group’s senior vice president of policy, economics, and regulatory affairs.

“We want a seat at the table,” he told Oil & Gas Journal Mar. 29.

That means, most notably, accepting the idea of direct federal regulation of methane.

Evolving positions

In 2016, as the Environmental Protection Agency (EPA) and Interior both expanded and strengthened methane regulations for the oil and gas industry, the industry argued that controls on volatile organic compounds (VOCs) are adequate. Now API is setting aside that argument, not as a matter of fact but apparently as a matter of political and regulatory realism.

Because API is a consensus-driven organization, not a group that gets ahead of its membership, it is meaningful that Macchiarola said “there’s a recognition on the part of industry” that there is a role for federal government in a regulatory focus on methane.

API is agreeing to the idea of a ratcheting down of flaring—the burning off of methane side streams at oil wells—with a goal of zero “routine” flaring by a date certain. The association wants a voluntary plan to lead the way but is conscious of the common pattern of federal regulators adopting such plans and turning them into mandates. Macchiarola left the possibility of such a mandate as an open question.

API also is willing to consider methane regulation in storage and transportation of oil and gas. The association is not offering blanket acceptance of the idea, but, as Macchiarola put it, is showing a willingness to participate in the regulatory process for addressing that area.

During the Obama administration, the industry argued that EPA had not gone through the needed legal steps of establishing that there was, in fact, a need for methane regulation in the storage and pipeline sectors.

Leasing worries in offshore

One of the industry representatives who had trouble detecting anything new in regulators’ comments during Interior’s virtual forum was Erik Milito, president of the National Ocean Industries Association.

Methane from offshore oil and gas wells already is tightly controlled, and an operator is required to capture and market the gas, Milito said Mar. 29 to explain why he did not anticipate significant change on that subject for the operators he represents.

Some regulatory changes are always in the works, he said, mentioning as an example current consideration of enhanced regulations for high-temperature high-pressure operations. But as for the multiyear push for tougher regulations after the 2010 Macondo well blowout beneath the Deepwater Horizon drilling rig, that has run its course, he indicated.

“Everything that had been recommended to the regulator has been taken care of in some fashion,” Milito said.

The indefinite moratorium Interior has placed on new leasing is a bigger concern, creating a lot of uncertainty, he said. The moratorium has a notable impact on service companies that do such work as seismic surveys on lease areas.

The Outer Continental Shelf Lands Act (OCSLA) requires Interior to maintain a schedule of lease sales but does not specify how often, nor does it specify how many leases need to be offered. That leaves wiggle room for the Biden administration to reduce the frequency and extent of offshore leasing.

Milito suggested a return to the status quo might be the best that industry can hope for. If the administration tried to frustrate OCSLA by severely reducing the schedule to bare minimum leasing, that might be “too cute by half” and a pretty clear indication that the administration wants to shut the industry down, he said.