HOUSTON — Oil and gas producers might have been expected to welcome a decision to loosen regulations affecting their business. But their reaction to the Trump administration’s move to roll back methane-emissions rules revealed at least tactical divisions on climate policy.
Contradictory voices quickly emerged at the end of the week between those who supported the move as a boon to domestic energy production and others who viewed it as a counterproductive measure that would sully the reputation of natural gas as a clean fuel.
Global oil and gas companies generally distanced themselves from the administration decision, while smaller domestic companies that are struggling to make a profit at a time of low oil and gas prices said they supported the rollback.
The divide reflected differing visions of the industry’s future in light of growing concerns about greenhouse-gas emissions that cause climate change.
Natural gas often escapes unburned during production and distribution, and its essential component — methane — is more than 80 times as potent as carbon dioxide in trapping heat in the earth’s atmosphere in the 20 years it takes to dissipate.
The administration’s move would loosen regulations affecting methane emissions from pipelines, storage tanks and wells.
Without constraints on harmful emissions, some in the industry feel they will be less effective in arguing that gas should replace coal in generating power.
And that would strengthen the case for favoring sources like wind and solar energy rather than gas to control global warming.
Gas vs. coal
“What some people in the industry do not get, but others are beginning to get, is that we are transitioning to a low-carbon economy,” said Mark Boling, former executive vice president of Southwestern Energy and a consultant to oil companies trying to monitor emissions in Colorado. “If natural gas is going to replace coal, we need to show the climate benefit.”
Natural gas has replaced coal as the most important power fuel in the United States in recent years, largely because it is inexpensive and far cleaner to burn.
Proponents say gas can be a “bridge fuel” that can back up wind turbines when the wind does not blow and solar arrays when the sun does not shine.
But critics note that the problem of leaks may be underestimated to the point where the environmental benefits of gas have been overstated. Big companies that propose to ship gas around the world in pipelines and in cooled liquid form want to counter that argument so they can increase exports to countries like India and China.
Under increasing pressure from shareholders, activists and their own employees, BP, Shell, Exxon Mobil and several other international oil companies have joined the Oil and Gas Climate Initiative, which is pledged to reduce gas emissions. It is one part of a growing acknowledgment in the industry that climate change and future regulation are a threat.
“Shell has long supported the direct regulation of methane when regulation is efficient, effective and encourages innovation,” said Gretchen Watkins, Shell’s president for U.S. operations. “While the law may change in this instance, our environmental commitments will stand.”
BP said Thursday that the Environmental Protection Agency should regulate methane emissions from both new and existing energy sources.
“We have to reduce methane emissions for natural gas to realize its full potential in our energy mix,” said Susan Dio, BP America’s chairman and president.
But the industry’s principal trade organization, the American Petroleum Institute, took a different tack. The group, which represents all facets of the industry, from production to refining, voiced support for the Trump administration’s action and said companies were controlling leaks without government intervention.
Erik Milito, a vice president at the institute, said the organization welcomed “smart regulations” that “provide the flexibility to develop and deliver affordable and reliable American energy.”
Among the critics of government methane regulations are the thousands of small producers who pump oil around Texas, Oklahoma and Louisiana from wells that sometimes produce as little as 10 barrels a day. They say they cannot afford higher compliance costs.
“They want us to comply with extremely expensive equipment and procedures that will hinder us from making a profit,” Darlene Wallace, president of Columbus Oil, an Oklahoma company, said of those who promoted stricter standards adopted during the Obama administration. “Most people who own marginal wells are rural people, and all the regulation is going to do is take a living away from a lot of people.”
Patrick Montalban, chairman of Montalban Oil and Gas Operations in Montana, said tighter regulation meant “a tremendous amount of administrative and field expenses that is not required,” adding, “You are not saving the environment by doing this.”
The administration decision is bound to be popular with many oil workers who are skeptical about climate change and see regulations as a threat to their jobs. But many oil executives have shown little enthusiasm for administration initiatives that would open the way for exploration in the Arctic National Wildlife Refuge in Alaska and deepwater areas off the Atlantic coast. They cite a supply glut and plenty of exploration opportunities in existing shale fields. They also privately express concern that the trade war with China could limit their oil and gas exports in the future.
And in addressing environmental concerns, some big companies are taking a new look at technological solutions. Chevron and Occidental are investing in a Canadian company that is designing a way to sweep carbon dioxide out of the air to produce a clean fuel.
Executives are also beginning to speak out more bluntly about climate change, and in support of the 2016 Paris climate accord that President Donald Trump abandoned.
“It’s for both moral and economic reasons that we should not vent methane or flare,” said Bill Maloney, a board member for two private oil and gas companies.
“Why in the world would we want to make a product that we can sell and then vent it into the atmosphere?” added Maloney, a former executive vice president for development and production in North America for Statoil, the Norwegian company that has since changed its name to Equinor.
Since 2014, more than a dozen medium-size oil and gas companies, including Hess, Apache and Noble, have sided with an effort called One Future Coalition that aims to trace and reduce gas emissions. They are joined by Kinder Morgan, the pipeline giant, and several utilities.
Early indications are that there will not be a retreat from the effort.
“We will continue to urge the EPA to retain the main features of the existing methane rule,” said Scott Silvestri, a spokesman for Exxon Mobil, the country’s largest oil company. “Last year, we announced our support for the direct regulation of methane emissions for new and existing oil and gas facilities. That hasn’t changed.”
Mark Brownstein, a senior vice president of the Environmental Defense Fund who has worked with oil companies to reduce methane emissions, expressed cautious optimism.
“I think the larger and globally focused companies continue to focus on this issue and getting it right,” he said. “But this is a situation where the laggards define the reputation of the product. This will ultimately come down to the weakest link in the chain.”