Now more than ever: The business case for strong methane regulations

In the evolving global energy economy, methane emissions have become a critical variable in the oil and gas industry’s long-term performance. Investors want lower emissions. Large natural gas importers want lower emissions. And forward-thinking companies that recognize these global trends are taking action to reduce their emissions.

Yet despite this momentum, oil and gas methane emissions remain unacceptably high. Though some companies have supported commonsense policies and are already implementing cost-effective measures to reduce emissions, poor data quality and outdated regulations have undermined progress, and the gap between leaders and laggards has grown.

That’s why governments around the world, including the United States, have adopted methane regulations that level the playing field and raise the bar for everyone. Many companies have lined up to show their support for these regulations because they recognize the role they will play not just in achieving environmental benefits, but also in securing long-term access to investment and international customers. Without a level playing field that lifts all US energy companies, they know their industry’s global reputation is at risk.

But as a new Congress and a new administration prepare to take office, America’s thoughtful, strategic methane rules are at risk.

With such high stakes, companies and their investors should use every tool – especially their political influence – to defend these regulations and ensure their success.

The strategic imperative of methane regulations

The main ingredient of natural gas, methane, is a potent greenhouse gas that has more than 80 times the warming power of carbon dioxide over a 20-year period when emitted into the atmosphere. It’s so powerful that we will not hit global climate goals without tackling methane. The oil and gas industry is not only among the largest emitters of methane, but reducing these emissions has also been identified as the simplest, quickest and most affordable methane reduction opportunity on the planet.

It’s also smart business. Every ton of avoided methane leakage is a ton of natural gas that can be sold or used. Moreover, countries that rely heavily on imported natural gas have signaled they will prioritize suppliers that can prove they are minimizing their methane emissions. Simply claiming “we’re tackling methane” won’t cut it.

US methane regulations provide a credible and reasonable framework for companies to demonstrate their performance through rigorous methane reduction, monitoring, reporting, and verification standards.

Economic benefits of methane regulations

Effective regulations can accelerate innovation in technology and business practices, advance research, and create jobs.

Despite arguments from some industry lobbyists, US methane regulations are cost-effective and achievable for operators of all sizes. For example, marginal wells face minimal monitoring costs – only $336 to $630 annually – and have up to five years to comply, giving operators time to retrofit for compliance or take advantage of federal and state funds to help close and plug end-of-life wells.

States like New Mexico, where regulations have been in place since 2021, show that these rules do not hinder production. In fact, transitioning to advanced monitoring technologies and capturing methane can drive efficiency gains and cut costs. The US EPA projects $1.4 billion in annual savings by 2033 from increased gas recovery – a dual win for the environment and the bottom line. And amidst these cost savings is job growth – methane abatement is attracting investment and creating jobs and economic opportunities across the country.

Preparing for a global shift

Internationally, major players in global energy markets are increasingly demanding lower emissions-intensity oil and gas.

The European Union – which imported two-thirds of all US liquefied natural gas (LNG) shipments in 2023 – has adopted legislation to cut methane emissions from its own energy sector and, critically, from its imports.

Governments and gas consumers in Japan and South Korea, the world’s second and third largest LNG importers, are similarly using their buying power to gather supplier emissions data and accelerate methane mitigation activities. The CLEAN Initiative in Japan and South Korea, with 20+ companies representing 25% of global LNG demand, is working to reduce supply chain emissions through transparency and cooperation.

Methane regulations will help demonstrate that US natural gas is a lower-emissions option and not just a marketing slogan, enhancing the reputation of American energy products and removing barriers to entry in international markets. This will become increasingly important as MethaneSAT and global accountability frameworks bring new, radically transparent visibility into the sector’s emissions.

US state and federal regulations hold the key

At the federal level, comprehensive methane regulations were developed through extensive consultation and collaboration with industry stakeholders, communities, and civil society and provide a balanced approach that empowers industry to improve.

At the center of this approach are EPA’s methane standards, which aim to decrease emissions by 80% from covered sources over the next 15 years. These standards require increased leak detection and repair, while giving companies flexibility to use affordable direct measurement and advanced monitoring technologies. They also give operators cost-effective options and ample time to phase out routine flaring and polluting equipment.

EPA has also modernized reporting requirements to ensure emissions data is accurate and based on empirical evidence. These updates, paired with new satellite data, will lead to enhanced emissions management and faster emissions reductions. They will also ensure that the upcoming Waste Emissions Charge required by the Inflation Reduction Act is fairly and accurately assessed.

If effectively implemented by the states, these regulations will drastically reduce emissions and level the playing field for US operators: the National Petroleum Council predicts swift implementation of these rules will produce significant methane reductions between now and 2030. These cuts will reduce companies’ market risk and position them favorably amidst growing public, investor, and consumer scrutiny of methane performance.

For investors, supporting these regulations and holding companies accountable for their emissions will enhance transparency and improve risk assessment, promoting best practices across the sector and safeguarding financial performance.

Seizing the opportunity

By targeting methane emissions through cost-effective and technologically feasible measures, EPA methane regulations are a crucial tool to address climate change and maintain US competitiveness in a changing global energy economy. Ongoing support and engagement by investors and industry leaders can catalyze widespread adoption of these practices, driving both economic returns and environmental stewardship.