Obama Pushes Forward With Emission Rules – 5/23/16

In its latest attempt to meet environmental policy goals, the Obama administration has set forth limits on methane emissions from oil and gas wells. The emission rules would, in theory, reduce methane emissions by 40% to 45% from 2012 levels by 2025. The EPA estimates that the cost of the rules will come to $530 million in additional upgrades and “green completion” technology per year by 2025 with a net $160 million gain in value from avoided costs related to healthcare, pollution, and climate change.

Naturally, the oil and gas industry is unhappy with the changes. The regulation comes at a time when energy companies are already cutting back on investment in fossil fuel-related activities. Companies in opposition to new rules critique them by citing work already done to cut methane emissions, the way added burdens would exacerbate damage done by low oil and gas prices to jobs, and the disproportionate impact the rules would have on small, independent producers.

Oil-and-gas producers do have some financial incentive capture methane and cap leaks since the gas itself is worth something, but the new rules come at a painful time: Oil hovers around $50 a barrel and natural gas fairs about the same. With a shift away from heavy industry in China, renewable energy reaching competitive cost levels, fuel efficiency standards rising, and the prospect of affordable electric cars, many companies are already facing existential crises without help from the government.


The significance of the methane rules pale in comparison to the carbon dioxide rules in the Clean Power Plan (CPP). EIA’s Annual Energy Outlook 2016 (AEO2016) shows that trends in carbon dioxide (CO2) emissions from electricity generation through 2040 depend significantly on whether or not the CPP rules are ultimately enforced. The EIA provides two AEO2016 cases: a Reference case assuming implementation of EPA’s final CPP rule and a No CPP case assuming it never comes into effect as shown below.

Co2 and clean power plan

In the Reference case, power-sector emissions are projected to be 28% lower in 2022 than in 2005 with a further falls to 35% lower overtime. Under the plan, the power sector’s share of total energy-related CO2 emissions would fall to 31% from 36% by 2030, accomplished via switching to natural gas and renewables like solar and wind, as well as increased efficiency.

Significant coal retirements are expected regardless of the CPP’s fate due to pressure from other environmental regulations and low-priced natural gas.

Clean power effects

The Reference case also assumes remaining coal power plants are used less intensively resulting in a decline of 34% from 2015 to 2040 in coal consumption by the electric power sector.

US coal production w clean power

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