The Biden Administration is hot on the heels of U.S. oil and gas producers by ramping up new regulations for methane emissions associated with drilling. Biden chose the 27th annual United Nations Climate Change Conference, known on the street as COP27, to unveil his new regulatory framework, funding priorities, green energy partnerships, and many other areas of emphasis.
With an aim for making good on promises of reducing pollution and harmful emissions countries made at COP26 in Glasgow, Scotland, the Administration is doubling down on vilifying the oil and gas sector as the main culprit. We’ll look at the bold plans in the works, focusing on the EPA’s proposal for revising its standards to radically reduce “wasted energy and harmful emissions,” while specifically calling out the oil and natural gas industry.
Painting a Target on Oil and Gas
“The oil and gas sector represents the fastest and deepest methane emissions reduction opportunities to achieve the GMP target,” reports the Whitehouse Fact Sheet posted November 11, 2022. The Administration was quick to conclude that oil and gas are the main culprits for methane emissions. This, therefore, represented the greatest opportunity for reaching the Global Methane Pledge (GMP) targets set by the U.S. and European Union at COP26. With a “dramatic reduction in global methane emissions of at least 30% by 2030 from 2020 levels,” the initiative is indeed bold. The area of emphasis painted by the Whitehouse was the opportunity to capture flared and leaked gas. In fact, the entire plan for rapidly reducing methane emissions is unabashedly directed toward the energy sector.
The Administration also gave broad-reaching power, with a hyper-focus, to the Environmental Protection Agency (EPA). This power proposes a strict set of new regulations to cut both pollutants and methane emissions from the oil and natural gas industry. The EPA’s proposal also gives the agency the authority to set up a new “Super-Emitter Response Program”. This allows them to beef up enforcement in the event of high-volume methane leaks from operators. This program will work in conjunction with UNEP’s Methane Alert and Response System (MARS).
New Standards for U.S. Oil and Gas
The unprecedented move to require majors to meet Paris Agreement emissions and reductions standards is a historical first. With the action, the government is hoping to reduce greenhouse gasses (GHGs) and shore up the U.S. supply chain from risk tied to climate change. The new “Federal Supplier Climate Risks and Resilience Proposed Rule” will require each company to publicly disclose data related to their GHG emissions, any financial risks tied to climate and create their own targets, based on science, for emission reductions.
So Many Focus Areas, So Little Time
The President’s initiative also adds to the U.S. Methane Emissions Reduction Plan (MERP), which imposes fees on excess methane emissions and was part of the colossal, yet toned-down, Inflation Reduction Act. The combined initiatives have so many different missions/goals it may make your head spin. In addition to the obvious desire to curtail emissions, the President seeks to achieve reducing consumer costs, spur job creation, and secure economic gains. This specific area contains over 50 different actions the Administration is attempting to take on simultaneously to address domestic methane emissions.
Bear in mind, the MERP is only one initiative among hundreds of others contained in Biden’s COP27 highlight reel. In perhaps a now-trademark style of throwing everything (and we mean everything) at the wall and seeing what sticks (anybody remember the bloated $2.4 trillion Build Back Better Act?) the Administration’s plans for tackling emissions is indeed latitudinous.
A few of the highlights include:
- More Funding: First up is adding $100 million to the Adaptation Fund and $150 million to the President’s Emergency Plan for Adaptation and Resilience (PREPARE) across Africa. These initiatives span the gamut, with everything from two new climate study facilities to bolstering risk-based insurance on the continent. These efforts are in addition to the $20 million already pledged to PREPARE. The Administration also plans to use public finance to garner additional “billions in private investment.”
- More Green Energy: The initiative highlighted partnering with Egypt for a new 10 GW wind and solar farm and decommissioning 5GW’s-worth of natural gas generation to tackle methane emissions and hit the GMP targets.
- Requiring Majors to Hit Paris Agreement Targets: This would make the U.S. the first national government to require oil and gas majors to abide by the Paris Agreement, which Biden rejoined on his first day in office. The Administration plans to hold majors to the fire by “leveraging the Federal Government’s over $630 billion in annual purchasing power,” remarks the Whitehouse November Fact Sheet.
- Engaging “All of Society”: In perhaps the most ambiguous of the President’s initiatives we found the desire to engage the entirety of humanity in tackling the climate crisis. This includes launching a “Climate Gender Equity Fund”, among many others, in an effort to meet the far-reaching demands of this Whitehouse-announced initiative. Per the U.S. The Department of State, the Climate Gender Equity Fund exists to address the “disproportionate impacts of the climate crisis on women and girls”. As such, the United States Agency for International Development (USAID) is pledging more than $6 million to fund “gender-equitable climate action”. The effort raises additional questions regarding the government’s definition of women.
The above statements represent just a fraction of the initiatives outlined in the voluminous November Whitehouse Fact Sheet.
Ignoring the Elephant in the Room
We’ve previously reported many instances where Biden’s Administration has gone on the offensive against oil and gas.
Perhaps one of the most glaring examples where the narrative simply doesn’t match the facts lies in our covering of the Future of Global Energy Greater Houston Partnership Summit back in July of this year. There, leaders from bp America, Hess, leading energy law firms, research universities, and more all came together to discuss emerging energy trends’ strengths and weaknesses.
With a giant list of “who’s who” among energy players, one might have expected U.S. Energy Secretary Jennifer Granholm to at least make a cameo. However, if she was in attendance, her presence was not made known. Contrary to the Whitehouse narrative (including Secretary Granholm’s), the Houston Summit provided example after example of energy companies leading the way in research and development of new green initiatives—including tackling the regulatory mire produced by competing government agencies crafting differing standards.
Examples like Hess researching moonshot ideas that show incredible promise such as using plant root systems to absorb billions of tons of carbon each year, energy tech firms developing brand new technology for remote field operations to gather uniform measurements, and eliminating routine flaring with machine and system retrofits all serve to showcase just how late to the party the Administration is in programming meaningful climate-change initiatives.
Because Biden fails to take notice, we’ll continue to point out the facts (those things proven to be true):
- Global majors already invest billions annually in research and development for a wide array of environmental, social, and governance (ESG) projects—more so than any other industry.
- Projects developed by researchers and scientists in the energy sector include resilient hydrogen, bioenergy, expanded EV charging, wind and solar at scale, cutting CO2 emissions, carbon capture and storage, and so much more.
- Between Chevron, bp, Shell, and ExxonMobil alone, there is a combined $26.6 billion in the works over the next few years specifically for ESG, net-zero, and decarbonization initiatives. In comparison, Apple reports committing around $3 billion in total for all of its values-based investments and community donations since the fiscal year 2018. Bear in mind, those investments may be “values-based” but are meant to produce a return for Apple.
Just to keep things apples-to-apples, we’ll also look at Morningstar’s ESG ratings for companies. As an investment rating service, Morningstar looks at exposure to ESG risks and how well companies are managing ESG initiatives internally to provide a score. With extremely high exposure to ESG-related issues, supermajors like Shell, Exxon, and Chevron all have “strong” ESG management ratings. Per the unbiased, statistics-centered Morningstar rating system, this means the “robustness of their ESG programs, practices, and policies” is as good as it gets. In sum and substance, three of the world’s top oil majors are all strongly managing their ESG programs.
Published at Tue, 24 Jan 2023 09:23:28 -0800