Companies rush to cash in on EPA rules for capturing methane emissions
Summary
Oil-and-gas industry divided over regulations to curb leaks from wells and storage tanks
New Environmental Protection Agency rules promise to give a significant boost to what is becoming known as the methane mitigation industry.
The pending rules, which require oil-and-gas companies to cut leaks of methane gas, could lift the bottom line of companies that produce the equipment needed for compliance, including such oil-field service giants as Schlumberger Ltd., Baker Hughes Co. and Honeywell International Inc.
The EPA rules are expected to be finalized within the next year and would affect hundreds of thousands of wells, storage tanks and natural-gas processing plants. They could require companies to replace leaky, older equipment and buy new monitoring tools to sharply reduce emissions of methane, a planet-warming gas that traps more heat than carbon dioxide.
The proposed regulations have divided the U.S. oil-and-gas industry. Broadly supporting the initiative is the American Petroleum Institute, a trade group that represents Honeywell, Schlumberger and Baker Hughes as well as large oil-and-gas producers who are already investing in ways to leakproof their operations. They have backed issuance of new rules while asking the EPA to change parts of the proposal.
Smaller well operators generally oppose the EPA’s plans, saying they won’t be able to afford the compliance costs. The Independent Petroleum Association of America, which represents thousands of companies in the oil-and-gas-extraction business, said the EPA rules would raise the costs of operating low-production wells, which pull less than 15 barrels of oil or an equivalent of natural gas a day and contribute about 10% of U.S. production.
The association told the EPA that shutting down such wells could hurt local economies. “While the citizens of these rural parts of the country are certainly concerned with the ‘climate and health impacts of pollution’ … they are also concerned with their livelihood and putting food on the table," the letter said, referencing a phrase EPA used to describe the rule’s benefits.
The EPA has proposed some exceptions for smaller wells. Still, the agency has estimated that 280,000 well sites will be affected when the new monitoring requirements are expected to go into effect in 2026.
Agency officials and climate activists say producers can sell captured methane gas, but that incentive hasn’t been enough to get companies to cut down on emissions. EPA researchers estimate that natural-gas systems emitted roughly 6.6 million tons of methane into the atmosphere in 2020. That is the second-largest source, besides methane from livestock digestion.
In March, Schlumberger announced a new business unit dedicated to helping customers cut methane emissions, which Chief Technology Officer Demos Pafitis called “one of the most pressing issues of climate change."
The regulations could drive business for smaller suppliers too.
One proposed requirement is that some major storage tanks capture nearly all their methane emissions. Flogistix LP, which makes devices that capture methane rising to the top of liquid storage tanks, has an order list reaching into next year and is planning on tripling manufacturing capacity this summer by opening a new factory in rural El Reno, Okla., said Chief Executive Mims Talton.
Investors are pressuring producers to capture and sell more methane, but the proposal could boost sales by an additional 20%, Mr. Talton estimated.
“There are companies that won’t do anything without encouragement," he said. The company’s vapor-recovery device costs between $80,000 and $450,000.
Other proposals call for outright replacement of leaky equipment, such as pneumatic devices that release natural gas into the atmosphere every time they move a valve to control tank pressure and liquid levels. Regulators estimate that there are roughly 1.6 million such devices in use.
The rules are also expected to require more frequent monitoring for methane leaks.
That could be a boon for Arkansas-based Montrose Environmental Group Inc., which is looking to the rules to drive demand for the inspection services of its engineers, field technicians and scientists, CEO Vijay Manthripragada said.
“We sit between the regulators and the regulated," he said.
Honeywell, Baker Hughes and several other companies that sell surveillance systems that continuously monitor for methane leaks are lobbying for the EPA to endorse their technology as an option for compliance. In-person, periodic inspections with hand-held devices are time-consuming and can be thrown off by the weather or human error, they said in a joint letter to the EPA.
Kuva Systems began selling its surveillance systems last year. Chief Executive Stefan Bokaemper said he is preparing to transfer camera manufacturing from the 32-person company’s Cambridge, Mass., headquarters to a contract manufacturer in anticipation of higher volumes.
All told, more than 200 companies are in the business of finding, preventing or fixing methane emissions, including startups and longtime manufacturers, according to a 2021 report from the Environmental Defense Fund, an advocacy group that supports stricter rules.
Robert Kleinberg, a former oil-and-gas industry engineer who studies the intersection of technology and regulation at Columbia University’s Center on Global Energy Policy, said capturing escaped methane largely poses a more welcome challenge for oil-and-gas producers than cutting carbon dioxide. Making more airtight natural-gas systems, he said, is easier.
Oil-and-gas industry officials “love engineering problems because they are engineers at heart," he said. “With an incentive [to find a solution], they’ll go at it like beavers."
