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Could Obama’s Push to Lower Methane Leaks Have a Long-Term Positive Fiscal Impact on Producers?

Could Obama’s Push to Lower Methane Leaks Have a Long-Term Positive Fiscal Impact on ProducersOver a five-year period ending in 2014, the amount of Methane gas – a greenhouse gas that escapes when oil wells are drilled – that had leaked into the atmosphere totaled about 375 billion cubic feet. That amount is astonishing, and most oil and gas industry detractors would argue that this could have a profound impact on global warming. What’s more, had the escaped methane been retained rather than released, it could have been used to heat homes and businesses, making the lost methane not just controversial, but wasteful as well.

And so, the U.S. Department of Interior recently announced new regulations for oil and gas drilling on federal lands and lands controlled by Native American tribes. According to an article in Forbes, the regulations would affect 100,000 wells, and sets a goal of capturing 40 to 45 percent of methane that would otherwise escape.

The Problem with Methane

So what’s the big deal about methane, anyway? When one thinks of greenhouse gases, carbon dioxide is typically the culprit that comes to mind.

Scientists report that Methane Gas is 72 times more powerful than is carbon dioxide at trapping heat within the atmosphere. However, methane in the atmosphere disperses five times as quickly as does carbon dioxide. The challenge stems beyond that though, and has greater implications for tax payers (lost gas on natural lands could result in the federal government spending up to $23 million per year), oil and gas producers, and the world at large; if more than 3.2 percent of methane that is produced escapes, the loss of methane completely outweighs the original benefits of switching from coal to natural gas.

Methane Emissions Falling

The goal behind the new regulations is to prevent emissions of greenhouse gases, which lead to the global warming controversy and lost revenue for producers. The EPA believes that the crack down will be effective, buoyed by evidence that stricter regulations and better equipment can lead to decreased levels of methane gas in the atmosphere (to be sure, the level of methane gas released fell by a dramatic 20 percent from 1990 to 2010 thanks to both).

A Boon for the Oil and Gas Industry

But while the regulations are being imposed for the earth’s sake, oil and gas producers should not shirk away from the proposition; the Obama administration believes that preventing leaks of methane gas that could be sold has the potential to increase the output of the industry by more than $180 million per year.

The regulations, then, serve not only as a potential global benefit, but a much more localized one that should also improve producers’ profits. There will undoubtedly be a cost for staying within the restrictions of these new regulations, but there are no reports pointing to this being greater than $180 million annually for oil and gas producers.

More producers are investing in natural gas retrieval. For mineral rights owners, this could result in an aggressive attempt by companies to acquire land and drilling rights. If you have questions about your mineral rights and how to protect your best interests, contact Phillips Energy Partners today.

The post Could Obama’s Push to Lower Methane Leaks Have a Long-Term Positive Fiscal Impact on Producers? appeared first on Phillips Energy Partners.



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Could Obama’s Push to Lower Methane Leaks Have a Long-Term Positive Fiscal Impact on Producers?

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