As I have mentioned previously, there is a continual push-and-pull when it comes to Environmental and Social Governance (ESG), especially within oil and gas. The big news was the recent delay in the implementation of three rules regulating methane within the oil and gas industry.
Methane background. Within the Biden Administration’s Inflation Reduction Act (IRA) were three significant rules directly impacting oil and gas, which included changes to the New Source Pollution Standards (NSPS), revisions to the Greenhouse Gas Reporting Program and the implementation of a Waste Emission Charge for excess methane emissions.
The IRA was repealed by the Congressional Review Act in March 2025. This prevented the EPA from collecting the Waste Emission Charge until 2034, and it delayed the implementation to the changes in the NSPS for 18 months. The specific requirements under the NSPS included the deadline to meet certain requirements related to control devices, equipment leaks, storage vessels, process controllers, and covers/closed vent systems. This includes extending the deadline to require that flares and enclosed combustion devices used to control emissions have a continuous pilot flame and for an alarm to be sent to the nearest control room, if the pilot or combustion flame is not lit.
These specific requirements have already been implemented by many major oil companies, but not by most of the smaller and mid-sized companies. The entire rule is still under EPA review and can be eliminated entirely. The entire Greenhouse Gas Reporting Program is under a proposed rule to be scrapped.
The EU Methane Program. You may ask, why accelerate compliance like some companies have, if the program may be entirely eliminated. Well, the answer is the EU Methane Emission Regulation (MER), which became effective as of Aug. 4, 2024, which introduces new requirements for domestically produced and imported crude oil, natural gas, and coal. These requirements include efforts to accurately monitor, report and verify (MRV) methane emissions to meet equivalent EU operators' standards by 2027, and compliance with methane intensity reporting by 2028, and the methane intensity import standard by 2030 for contracts beyond August 2030.
For many major U.S. operators, selling LNG into the EU is a growing and emerging market, and if they are to participate in this program, they will have to meet EU methane standards. So, as much as we are seeing a rollback in regulations in the U.S., the need to continue with methane emission monitoring and control will be a priority for those operators looking to participate in the EU market.
One concern with the EU market is much of the standards have yet to be developed, and implementation will be difficult, as many importers have addressed concerns over how to comply, as the program implementation is still under development. Then there is the tarriff issue and how that might play a role. Will the Trump Administration try to waive the EU MER for U.S. companies? There are many things that can still happen, so we will need to pay attention here. There are some, myself included, that believe that new sanctions against Russia will drive the EU to look for new gas suppliers, and the U.S. will be a likely candidate to fill that role. There are many balls in the air here, so it will be interesting to see how this all plays out.
Other incentives. I have previously discussed the Responsibly Sourced Gas (RSG) standard, which again was a methane reduction standard that allowed for U.S. companies to sell natural gas at a premium. This can continue to provide another incentive for methane reduction. There is a movement to replace the term RSG with “certified gas.” A number of certification companies have emerged to certify this gas. Will the U.S. market grow, and will the push against DEI and ESG impact this market?
Where is ESG going? In a recent survey by Bain and Company, a global management consultancy firm, it was found that 50% of the companies surveyed value sustainability in their buying decisions. In this study, they found that 54% of CEOs linked sustainability to business value, up from only 34% of CEOs in 2018. If this trend continues, this could help the “certified” gas movement.
But at the same time, Texas Attorney General Ken Paxton announced the launching of an investigation into proxy advisory firms Glass Lewis and Institutional Shareholder Services (ISS), alleging the companies potentially misled investors by recommending companies implement DEI and sustainability policies. So, there may be a push against sustainability.
Disclosures and reporting. One big change has been the scrapping of the entire Greenhouse Gas Reporting Program in a current proposed rule. It also looks like the SEC disclosure rules will be impacted. I had previously discussed how the Biden and Obama EPAs had been sued for overreach, with the government losing on those cases, which set precedents for the EPA and other government agencies for reaching beyond their charter.
Well, the SEC disclosures seemed to follow those same issues. But it’s interesting that the U.S. Court of Appeals, instead of ruling, asked the SEC under Trump to either defend, change or appeal the climate reporting rules. It is very likely we will see these rules repealed.
What about CCUS? With Greenhouse Gas reporting being eliminated, does that mean we will see a reversal of the growth in the Carbon Capture Utilization and Storage (CCUS) market? If we aren’t reporting GHG emissions, will this impact the CCUS market? As I have stated before, the 45Q tax credit has been around since 2008 and has quietly been increased over the years, including in Biden’s IRA. And even though much of the IRA was repealed, Trump’s Big Beautiful Bill increased the 45Q tax credit for EOR and kept the other increases established in the IRA.
So, I think we will continue to see a growing CCUS market in spite of the regulatory rollback for methane. I do find the humor in that methane is around 49 times more potent as a GHG than CO2, but it does not get its own tax credit and gets rolled back. Personally, I think the 45Q should go to a CO2e standard, where all GHG emissions get a tax credit and convert oil and gas to a truly sustainable industry, but that’s just my opinion. Until next month. WO
MPATTON@HYDROZONIX.COM / MARK PATTON is president of Hydrozonix, an oil and gas-focused water management company. He is a chemical engineer with more than 25 years of experience developing new technologies for wastewaters and process residuals.