The European Union will give energy exporters an extra year to prepare for its methane regulation, as it wants to avoid adding costs to energy supply, European Commission President Ursula von der Leyen told the European Parliament. The rules, due to take effect on January 1, 2027, would have required foreign oil and gas suppliers to the EU to monitor and report methane emissions. In recent weeks, EU officials indicated that it would be wise to delay implementing the regulation, as energy costs were high mainly because of limited supply from Russia’s invasion of Ukraine and the Iran conflict. But energy prices in the EU were already high before those disruptions because of the bloc’s climate policies. The bloc has wisely recognized that additional climate policy would drive prices even higher.
According to European Energy Commissioner Dan Jorgensen regarding the one-year postponement, “… this would give the market actors time to make sure that they can indeed implement these new rules without it hurting our security of supply and prices.” The United States and Qatar, both of which export LNG to the EU, have repeatedly indicated that the methane regulation would hurt both supply security and prices. Repsol SA, a Spanish energy and petrochemical company, said about 90% of its crude oil supplies would breach EU law because suppliers would not agree to provide the information the methane regulation requires. Some EU officials said it could be difficult to assess whether the rules are affecting oil and gas contracts because details of those agreements are generally not public.
Several EU states have urged a longer delay to the rules, but Jorgensen said the delay would be no longer than the one year initially offered. Czechia (Czech Republic) and Italy, for example, have called for a three-year delay. Supporters of the postponement believe companies are not ready to comply and that the rules could divert LNG cargoes away from Europe to avoid penalties, hurting Europe in a tight market. For example, the United States, Europe’s largest LNG supplier, warned that its output will head elsewhere if the bloc refuses to ease the regulations. Under the current rules, companies could face fines of up to 20% of their annual turnover. The European Commission had earlier suggested a three-year grace period on financial penalties, but the underlying legal mandate would have remained active if it had accepted the proposal.
U.S. to Loosen Biden-Era Methane Rules
On October 7, the U.S. Environmental Protection Agency (EPA) announced it is working on a proposal to adjust federal rules designed to reduce methane releases from oil and gas operations. It plans to change several aspects of the Biden-era rules, including repealing a program that would require energy companies to respond to reports of methane leaks. The Biden EPA’s “super emitter” program requires companies to react when third parties report suspected methane leaks using remote sensing. EPA also said it would propose to change regulations for a group of wells known as “marginal” oil and gas wells. Marginal wells are estimated to produce 7% of the nation’s oil and gas and about half of its methane emissions, and tend to be owned by smaller operators rather than large companies.
EPA also plans to “revisit” excess gas extracted alongside oil that is burned off—a practice known as flaring–that the Biden administration sought to eliminate at new oil wells. The EPA did not say what changes it was making, but that it would seek to make “compliance possible all over the country and ensure a reasonable approach.” Oil and gas companies would prefer not to flare the gas, but limited gas pipelines that move it to areas with demand constrain them. Lifting pipeline construction constraints would help alleviate flaring, as companies could sell the gas.
The Trump administration delayed implementing the Biden-era methane rules until next year. According to the EPA, rescinding the rules would save $45 billion a year. EPA Administrator Lee Zeldin said, “Americans must be able to afford to heat their homes in the winter and fill up their car and drive to work. They can’t do that when the people producing the energy are weighed down by unnecessary burdens.”
Conclusion
The EU has agreed to postpone its methane regulations for one year; they would have required foreign oil and gas suppliers to the EU to monitor and report methane emissions or pay penalties. The EU’s methane regulation was set to take effect on January 1, 2027. The United States and Qatar, both major exporters of LNG to the EU, have repeatedly said the methane regulation would hurt supply security and prices, and the United States has warned that it will sell its oil and gas elsewhere if the bloc refuses to ease the regulations. According to Repsol SA, a Spanish energy and petrochemical company, about 90% of its crude oil supplies would breach EU law because suppliers would not agree to provide the information the regulation requires. In the United States, the EPA is adjusting Biden-era methane regulations, with a proposal covering flaring and marginal wells, and other rules forthcoming that would save $45 billion a year. As energy affordability remains a central issue for governments and people worldwide, responsive governments are reducing regulatory burdens.
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