Slammed by the worst crude oil price downturn on record, the U.S. oil and gas industry may have another worry on the horizon: whether the upcoming election will undo some of President Donald Trump's efforts to walk back methane emissions regulations on the sector.
Democratic presidential hopeful Joe Biden's campaign plans include "day one" executive actions on emissions. The former vice president would require "aggressive methane pollution limits for new and existing oil and gas operations," according to his campaign website.
"Biden will use the full authority of the executive branch to make progress and significantly reduce emissions. Biden recognizes we must go further, faster and more aggressively than ever before," according to the site.
Cementing the rollbacks
The Trump administration has worked in many arenas to roll back Obama-era regulations, including those limiting oil and gas producers' methane releases. But Trump would likely need another term to finalize all rollbacks and mount a complete defense of them in court, experts said recently.
The U.S. Environmental Protection Agency and the federal Bureau of Land Management took on regulating methane emissions from the oil and gas sector under former President Barack Obama. Methane is a potent greenhouse gas that can escape or be vented during the production of oil and gas resources. The Trump administration has pursued rule revisions in an effort to limit the regulations' financial and operational impacts on the sector, but the rule updates have faced legal challenges from environmental groups.
With these objections still working their way through the courts, the legal process itself would likely take longer than the remainder of the president's first term, and an administration under Biden would not likely continue defending its predecessor's rules in court, experts said. Whether the next president is willing to defend the rules in court will make all the difference to whether the rules continue to exist, said Kevin Book, managing director of independent research firm ClearView Energy Partners LLC.
"That kind of political continuity can make the difference between something that becomes a decisive and effective or a permanent shift and something that would become transient and remains an open question," Book said.
If Biden is elected president in November, Book expects that the administration would address methane regulations "first thing." Democrats are interested in more strictly limiting methane pollution from new and modified sources as well as imposing new regulations on the climate-warming gas emitted from existing sources, Book said. The administration's rollbacks "more or less poked the eye of the environmentalists who have been agitating for tighter methane controls," he said.
"For green-leaning environmental attorneys, this is like waving a red flag at a bull. They're going to charge at this," Book said. "If nothing else, picking up where Obama left off would make the case for starting with methane."
With or without regulatory restrictions, the industry maintains that companies have already worked to reduce their methane emissions. The sector has formed coalitions to address leaks and flaring, and industry associations have encouraged operators to provide more in-depth reports on their climate and emissions mitigation practices.
These initiatives serve to "build upon the progress we've made to reduce emissions by nearly 70% in producing basins like the Permian during a period of significant oil and gas production growth," Howard Feldman, senior counselor for the American Petroleum Institute, said in an April 7 statement. From 2017 to 2018, methane emissions from the natural gas sector rose by about 0.4%, while oil emissions declined by 5.7%, according to a draft report the EPA released in February.
Getting final rules on, and off, the books
The EPA under Obama finalized a rule limiting methane emissions from new and modified sources in 2016 and issued an information request on methane emissions from existing sources. The BLM also announced a final methane rule for oil and gas sources on federal and tribal lands during Obama's last full year in office.
But a few months into Trump's term, the EPA withdrew its information request on existing sources, and Trump issued an executive order telling the EPA and BLM to reconsider their respective finalized rules.
In trying to act on the executive order's requests, both agencies have faced legal battles over proposed suspensions of the Obama-era rules. In September 2018, the BLM issued its final methane emissions rule that revised Obama's 2016 regulations on the industry. That rule, which is in effect, was immediately challenged by environmental groups and is still being litigated in the U.S. District Court for the Northern District of California.
Also in September 2018, the EPA proposed amendments to the 2016 New Source Performance Standards, which included lessening fugitive emissions monitoring requirements. Less than a year later, the Trump administration also proposed a rule that would effectively roll back the EPA's methane standards on new and modified oil and gas wells. The EPA has not issued a final rule on either proposal. In a recent email, the agency said it will provide an update on the expected timing of final rules in its spring regulatory agenda but did not provide details on the agenda's timeline.
Some sector observers are skeptical about whether the Trump administration will finish its work on the rule updates.
"They're not going to get the rules done, or even the ones they've got done, they're not going to get the litigation done in time to get to the Supreme Court, assuming there's only one term," said David Doniger, a senior adviser to the NRDC Action Fund. The fund is an affiliate organization of environmental advocacy organization Natural Resources Defense Council.
But Jean Mosites, an attorney and shareholder with Babst Calland law firm, said there could be enough time to finalize the EPA methane rules this year, and if a new administration wanted to change the final regulation, a full rulemaking process would be required.
"They need to do a notice and comment. They need to do a final rulemaking," said Mosites, who has worked with the oil and gas industry. "You couldn't do anything quickly. You would have to follow the same process."
Trump's final rules would be almost guaranteed to face some sort of legal opposition from blue states or green groups, and those court cases can take a long time as they make their way through the appeals process. The president may be less likely to receive a favorable ruling from the U.S. Court of Appeals for the District of Columbia Circuit, but the administration has been betting on the U.S. Supreme Court to back its rules, Doniger said.
For the time being, Obama's EPA standards on methane are still in effect, noted Peter Zalzal, special projects director and lead attorney with the Environmental Defense Fund. The organization is waiting to see whether the Trump administration finalizes either of its proposed rules.
"What to be looking out for is whether EPA will take any final action on either of these rollback efforts and, if so, what that will look like," Zalzal said.
All the while, much of the leaked methane from the industry comes from existing sources, which are not subject to federal regulation from the EPA, said Doniger. The Clean Air Act requires the government to regulate new and modified sources before finalizing a rule on existing sources.
Regulations on federal lands
Another four years under the Trump administration may be enough time to wrap up litigation on the updated BLM's methane rules, according to Kathleen Sgamma, president of the Western Energy Alliance. If Biden wins in November, "I think the same strategy of a death by 1,000 cuts to the oil and natural gas industry would ensue," Sgamma said.
The BLM's authority applies to federal lands, and industry groups challenged whether it is appropriate for the bureau to impose environmentally focused regulations. Obama-era BLM methane rule supporters contended that regulating methane falls within the bureau's mandate to oversee the use of the nation's natural resources.
Throughout the primaries, Democratic presidential candidates have called for policies that could limit the industry's methane emissions without implementing a methane rule. Biden specifically has called for "banning new oil and gas permitting on public lands and waters."
Federal lands authorities are vast enough that a Democrat seeking to restrict emissions could take meaningful measures by potentially ending federal lands leasing and permitting "eventually if not immediately," Book said. "Even if existing production were to continue, they could substantially stop new permitting, leasing and production using authorities that are on the books today."