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Exxon Moves to Limit Methane Emissions

By Rich Smith - Mar 3, 2020 at 12:40PM

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Oil companies against global warming?

In 2016, the Obama Administration Environmental Protection Agency (EPA) set new limits on methane emissions by the oil and gas industry, calling for emissions to halve by 2025. The Trump Administration has proposed rolling back those rules, and you might think the oil and gas industry would be happy about that (regulation -- bad, right?)  

Surprisingly, though, not everyone is onboard with rolling back the regulations.

ExxonMobil refinery

Image source: ExxonMobil

In 2018, for example, Royal Dutch Shell proposed limiting its own methane emissions to no more than 0.2% of natural gas extracted by 2025. (Globally, the International Energy Agency estimates that the average methane leakage rate currently is 1.7%). And today, ExxonMobil (XOM -1.80%) proposed a "model framework" for government regulation of emissions "in all phases of production."

Hinging on voluntary reductions in methane emissions, Exxon's plan urges companies to replace energy infrastructure components at production sites showing a "high-leak potential," improving production technology in general, and conducting additional research and gathering more data.

Practicing what it preaches, Exxon says it has successfully lowered its own methane emissions by 20% since 2016 at "unconventional operations" (i.e. fracking locations) and is on course to reduce its emissions by 15% across the board.

Why are Shell and Exxon taking these steps? To reduce global warming of course -- because methane in the atmosphere can become 80 times more potent as a greenhouse gas, than carbon dioxide, over long periods of time. Energy companies would also probably prefer to proactively help write the rules that govern their operations than have the EPA do it for them.  

From a competitive perspective, too, increased cost of regulation has the potential to grow costs for the companies' competitors, giving a business advantage to companies with larger scale of operation, companies like ... Shell and ExxonMobil.

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Exxon Mobil Corporation Stock Quote
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