What Biden’s New Methane Rules Means for Businesses
For several years, methane gas has been an essential part of our lives. Many observers believe that it’s one of the purest fossil fuels as it’s a component of natural gas. Methan powers our everyday automobiles, ovens, turbines, and whatnot. However, it can also be hazardous when in excess, causing global warming, vision problems, and other adverse health effects.
As a result, there’s the need to cut down methane emissions. President Biden’s new methane regulations, released just recently, intend to reduce methane emissions to a more manageable level.
What are these rules? And how do they affect businesses? This article is going to explore these questions.
According to experts, methane is a greenhouse gas that can cause global temperatures up to 80 times as much as carbon dioxide.
Since it’s a natural gas component that powers a substantial part of the US electricity sector, it can find its way into the atmosphere through leaks from oil and gas wells, processing equipment, or even pipelines. Methane is also a natural by-product of landfills and agriculture.
Climate change experts believe that reducing methane leaks is the best way to mitigate its effects. The new methane regulations were initiated by the Biden administration to curb the alarming methane emissions from oil and gas drilling and its related infrastructure.
The Environmental Protection Agency (EPA) proposed these rules, hoping that with proper enforcement and dedication on the part of stakeholders, methane pollution from fossil fuel companies would be cut down significantly.
The recently launched Global Methane Pledge, signed by President Biden, the head of the EU, and 103 other countries, has enjoyed widespread support. However, China, India, and Russia – incidentally three of the largest global sources of greenhouse gas – have not yet signed the pledge as of 2021.
The recently launched Methane Rules initiative by President Joe Biden’s administration includes the inspection of well sites and compressor stations. In addition, the rules include zero-emitting pneumatic controllers, new standards for pneumatic pumps, and the elimination of venting of associated gas from oil wells.
It also includes stronger emission parameters and stricter performance standards for existing and new sources.
Who Is Being Affected?
At first, it may seem that only businesses in the oil and gas industry are affected. However, the new rules cause a string of chain reactions throughout the global supply chain.
First of all, companies that cause methane emissions have to monitor, detect and control leaks and other activities to keep their emission levels below a set threshold. A compliance analyzer might be a need for these companies.
This includes repairing leaks from new and existing wells, equipment, and pipelines. All these measures add significantly to operational costs. However, the price is also high for noncompliance: a fee will be imposed on oil and gas companies that emit methane above the thresholds.
This and many other measures included in President Biden’s methane rules are expected to cost the oil and gas industry an estimated $1.2 billion annually.
What does this mean for other businesses? The extra cost oil and gas producers incur as a result of compliance is passed down the supply chain. As a result, sectors that rely on fossil fuels such as transportation and manufacturing have to bear the cost as well. Other industries that rely on transportation and manufacturing might also be forced to adjust their prices as well.
Consequently, fuel prices shoot up, and prices of raw materials are along with it. The cost of transportation, both freight and public, also goes up. This causes a general increase in the price of other commodities and services.
Other sectors likely to be affected indirectly by the methane rules are the airline, aerospace, and automobile industries. Production levels are likely to fall as a result of reduced demand and increased costs of production.
Finally, the agricultural sector will also be impacted significantly by the new rules, and not just because it depends on fossil fuels to bring farm products to the market. Agricultural methane is a by-product of the decomposition of livestock manure. Paddy rice cultivation also encourages the growth of methane-emitting bacteria.
Agriculture accounts for 9.6% of methane emissions in the U.S. Livestock alone generate 36% of agricultural methane emissions. Farmers need to play their part by taking advantage of incentives designed to battle methane emissions across the food chain to reduce these kinds of methane emissions.
The Way Forward
Despite the stringent nature of the methane rules, $775 million in incentives and grants have been made available to oil and gas companies in the sector. They are meant to help the companies stay and survive under the threshold.
Although the oil and gas industry is a pivotal part of the US economy, most other sectors rely on it; it’s also one of the largest greenhouse gas producers.
Considering the alarming effects of global warming as a result of methane and other related gasses, the best possible way to go is to try and reduce emission levels. The best path is to use emissions monitoring systems.
Further, experts are developing more sustainable fuel and energy sources to substitute fossil fuels through research and industry innovation.
Businesses can rely on some of these sources, including solar and wind power, for their operations. Fuel-efficient machines and infrastructure are being designed day in day out to cut down methane emissions. Finally, new advancements in agricultural technology can help reduce emissions coming from livestock farming and other activities that produce methane.