The European Commission (EC) published its Methane Strategy in October 2020. The strategy covers emissions from all sectors, but one of its key objectives is to impose obligations on companies to mitigate overall methane emissions. The strategy also states that the EC supports the targets formulated by the World Bank’s Zero Routine Flaring by 2030 initiative.

At the 26th session of the Conference of the Parties (COP26), held in 2021, the EC along with the United States announced the Global Methane Pledge, a commitment to reduce all human-made methane emissions. The participants (150 countries as of June 14, 2023) have also committed to advancing in that direction using good practice inventory methodologies, continuously improving the quality of their data, and ensuring greater transparency in key sectors.

Following the Global Methane Pledge, in 2021, the EC prepared the proposal for a regulation of the European Parliament (EP) and the European Council on methane emissions reduction in the energy sector, as well as an amendment of Regulation (EU) 2019/942. The proposed regulation requires the oil, gas, and coal sectors to measure, report, and verify methane emissions and proposes strict rules to detect and repair methane leaks and limit venting and flaring. The regulation would build on the Oil and Gas Methane Partnership (OGMP) 2.0 framework, provided the framework aligns with the regulation’s objectives of improving measurement and data quality.

The proposed regulation also puts forward global monitoring tools to ensure transparency regarding methane emissions from oil, gas, and coal imports into the European Union (EU). The EC would also consider further actions in the future. The EP passed the proposed regulation with amendments on May 9, 2023. The amendments enhanced the language on the oversight of fossil fuel importers. On November 15, 2023, EP and European Council announced a provisional agreement on methane regulations.

These steps align with the EU target—stated in Regulation (EU) 2021/1119, also known as the European Climate Law—to reach climate neutrality by 2050.
 

The key target of the Global Methane Pledge is global, not national or regional, and aims for a 30 percent reduction of all human-made methane emissions by 2030 compared with 2020 levels. This has the potential to prevent global warming over 0.2°Celsius by 2050. In line with its Methane Strategy , the EC will also examine available options for eliminating routine venting and flaring in the energy sector, in an attempt to complement the 2030 objectives of the World Bank’s Zero Routine Flaring by 2030 initiative.

Regulation (EU) 2021/1119  introduces a requirement to reach net-zero emissions across the EU by 2050 and defines an interim step for 2040 (see section 3 of this case study).

Methane emissions during oil and gas exploration and production; gas gathering and processing, transmission, distribution, and underground storage; and LNG operations (along with coal mines) were not specifically regulated at the EU level until the EC began working on specific regulations in 2021.

Regulation (EU) 2021/1119  includes the target of economywide climate neutrality by 2050 and establishes a commitment of at least 55 percent reduction of net greenhouse gas (GHG) emissions below 1990 levels by 2030. According to Part 2 of Annex V to Regulation (EU) 2018/1999 (“Governance Regulation”), the emissions to be reduced include those of carbon dioxide and methane. The relevant institutions and the EU member states shall take the necessary measures at the EU and national levels. Regulation (EU) 2018/1999, requires EU member states to establish national inventory systems to estimate GHG emissions and report national projections. The EP amendments include a new Article 1a, which explicitly refers to the above two regulations.

The 2021 proposal  builds on the provisions of the European Climate Law and the Governance Regulation and establishes applicable principles pertaining to the flaring and venting of natural gas and the treatment of fugitive methane emissions. Article 1, Paragraph 1, defines the scope—as amended by the EP —as measurement, quantification, monitoring, reporting, and verification of methane emissions in the energy sector in the Union, as well as emissions abatement through leak detection and repair (LDAR), and restrictions on venting and flaring. Tools for transparency regarding methane emissions from fossil energy imports are also introduced. According to Article 1, Paragraph 2, the regulation covers oil and gas (including processing, storage, and transmission), and LNG terminals.

Article 30, Paragraph 1, of the 2021 proposal  stipulates that key implementation provisions such as the appointment of a regulator, or multiple regulators (“competent authorities”), or fines and penalties remain with the EU member state on grounds of subsidiarity.

Resource ownership is subject to national jurisdiction.

Article 4, Paragraph 1, and Article 30, Paragraph 1, of the 2021 proposal  stipulate that national governments are responsible for key implementation provisions such as the appointment of a regulator, or multiple regulators (referred to as “competent authorities”).

Article 9 allows independent verifiers to carry out the activities required under this regulation.

Article 5 of the 2021 proposal  defines the tasks of the competent authorities. While performing the tasks, they shall cooperate with each other, with operators, and with their counterparts from other EU countries and the EC. Article 6 requires the competent authorities to conduct regular routine inspections such as site checks and field audits and document and record examinations. A note of remedial action shall be issued if a serious breach is detected. Routine inspections should be scheduled no less than every 16 months (as amended by the EP; see footnote 3); where inspection results revealed a serious breach, a follow-up inspection shall be conducted within nine months (as amended by the EP; see footnote 3). Nonroutine inspections shall be conducted following written complaints as per Article 7, or to detect leaks and the repairs thereof. The results of all inspections must be documented and made public within two months (see section 17 of this case study).

Article 8 of the 2021 proposal  states that independent auditors—referred to as verifiers—shall verify that the emission reports produced by operators and importers comply with the requirements. The audits will have emission factors, calculation and sampling methods, risk assessments, and quality control as key review items, and also include site inspections. The results are to be packaged into a verification statement asserting that the emissions report complies with the requirements and specifying the verification work that was done. Where the assessment concludes that an emissions report does not comply with the requirements, the verifiers shall inform the operator, which shall submit a revised report.

According to Article 9, the verifiers shall be independent from operators and shall conduct their mandated activities in the public interest. They shall also be accredited according to Regulation (EC) 765/2008.     

According to Article 10, for methane emissions data, verifiers, the competent authorities, and the Commission shall consider the information made available by the International Methane Emissions Observatory (IMEO). The EP amendments  also require the IMEO to report “super-emitters identified by way of an early detection and warning system.”

Article 15 of the 2021 proposal  bans venting except for a select few situations, such as emergencies, malfunctions, technical requirements, or safety reasons (as amended by the EP; see footnote 3). Technical requirements cover “pneumatic devices and pumps, dry gas seals, compressors, atmospheric pressure storage tanks, or other components designed to vent”; liquids unloading; and other activities necessary for safe operations. The EP amendments to Article 15 include new paragraphs on equipment standards. The amendments also require replacing equipment with zero-emission alternatives (if they exist) by the end of 2026, and the use of only zero-emission pneumatic controllers and pumps at newly built, replaced, or refurbished sites. In any event, operators can vent only if flaring is not technically feasible or entails safety risks.

Besides these circumstances, Article 15 allows flaring only in situations where re-injection, own use, gas processing, or dispatch of gas to market are not feasible for reasons other than economic profitability.

Article 15 of the 2021 proposal  bans routine flaring altogether, and also venting unless under specific situations (see section 9 of this case study).

No evidence could be found on development plans for associated gas as part of the overall field development approval for greenfield projects.

Article 15 of the 2021 proposal explicitly separates economic arguments from the permission to flare (see section 9 of this case study).

Article 12 of the 2021 proposal  requires operators to submit a report containing source-level methane emissions to the competent authorities. Starting 48 months after this regulation comes into effect, operators must submit to the competent authorities annual reports containing direct measurements of source-level methane emissions from their operated and nonoperated assets. The EP amendments  further detail the reporting requirements. Amendments are more stringent in terms of direct measurement and emissions quantification, and shorten the reporting times. The provisional agreement reached between the EP and European Council in November 2023 follows these recommendations. For example, operators must submit reports quantifying source-level methane emissions within 18 months and direct measurements quantification of source-level methane emissions for operated assets within 24 months from the entry into force of the regulations. Reports on nonoperated assets are due within 48 months.

Article 12 also mentions that the Commission will develop a reporting template. The EP amendments add that upstream, midstream, and downstream oil and gas operators can use the technical guidelines and templates of the OGMP 2.0 until the new template is available.

Article 14 requires operators to develop LDAR programs within six months of the date on which this regulation comes into effect and start conducting the first survey within nine months. 

Article 27, Paragraph 1, requires importers to report their products’ methane footprint within nine months of the date on which this regulation comes into effect. The provisional agreement of November 2023 requires exporters to EU to comply with a maximum methane intensity threshold by 2030.

Article 6 of the 2021 proposal  allows the competent authorities to conduct inspections and field audits, and check operators’ records, although no independent measurement methods are being prescribed.

Article 8, Paragraph 1, requires independent verifiers to verify that the emission reports submitted to them by operators are compliant in terms of emission factors and methodologies deployed, risk of inappropriate measurement and reporting, and any quality assurance and control systems implemented. Other measures such as site checks are also possible. Article 8, Paragraph 3, requires the subsequent issuance of a verification statement confirming that the emissions report complies with the requirements. Article 8, Paragraph 2 (as amended), requires verifiers to use “publicly available European or international standards for methane emissions quantification,” but operators must provide verifiers with information on the standards or methodologies used in case no European or international standards are available.

According to amended Article 8, Paragraph 2, “Verifiers shall conduct announced and unannounced site checks to determine the reliability, credibility and accuracy of the data sources and methodologies used.”

Amended Article 10 assigns the IMEO the task of “reporting of findings on major discrepancies between data sources contributing to build more robust scientific methodologies.”

The EP amendments to the 2021 proposal replace “estimation” with “quantification” and emphasize direct measurement. There are no specific formulas on engineering estimates, but the proposed regulation refers to the OGMP 2.0 framework, European standards, or international measurement and reporting standards.

According to Recital 13 of the 2021 proposal, “The main mechanism available to the competent authorities should be inspections, including examination of documentation and records, emissions measurements and site checks.” Article 5, Paragraph 2, of the 2021 proposal  requires operators to provide the competent authorities with all necessary assistance, including access to the premises and the presentation of documentation or records. Article 8, Paragraph 4, requires operators to provide the verifiers the same access.

Article 14, Paragraph 6, requires operators to record all leaks irrespective of size and keep the records for 10 years.

The IMEO was set up in October 2020 and launched at the October 2021 G20 Summit. The IMEO has been tasked with collecting, reconciling, verifying, and publishing anthropogenic methane emissions data at a global level. The Commission and the IMEO will set up a Methane Supply Index as envisioned in the EU Methane Strategy . According to Article 10, verifiers, the competent authorities, and the Commission shall consider the information made available by the IMEO, and the Commission shall submit relevant methane emissions data to the IMEO. 

Article 28 requires the EC to establish a methane transparency database based on the data supplied—this is in accordance with the requirements of the proposed regulation (some of which are discussed in section 16 of this case study). Article 29, Paragraph 1, requires the EC to establish a methane monitoring tool and make it publicly accessible.

Article 30, Paragraph 5, requires EU Member States to annually publish information on the penalties imposed under this regulation, the infringements, and the operators on which penalties have been imposed.

According to Article 4 of the 2021 proposal , the competent authority (or authorities) is (are) responsible for the enforcement of the regulation (see section 6 of this case study).

Article 30, Paragraph 1, delegates to the EU Member States the authority to set the rules on the penalties applicable to infringements and to take all required measures to implement the penalties, “including the polluter pays principle.” Article 30, Paragraph 2, requires penalties to be effective, proportionate, and dissuasive. Article 30, Paragraph 3, states that the key areas of infringement subject to penalties should be the failure of operators to carry out LDAR programs, assist the authorities, and submit emissions and LDAR progress reports. Venting outside the preauthorized environment, including the related reporting obligations, and routine flaring also constitutes an infringement subject to penalties (see sections 9 and 10 of this case study). EP amendments  add similar requirements for importers.

Amended Article 30, Paragraph 2 , allows for the “suspension of the authorisation to place oil, gas or coal to the market in case of serious or repeated breaches” of the proposed regulations subject to energy security considerations.

In light of the novelty of methane emissions regulations, the EC introduces several requirements, which are to be implemented and upgraded within a certain period after these regulations come into effect.

According to Article 4 of the 2021 proposal , EU Member States shall designate the competent authority (or authorities) and notify the EC within three months. Article 6, Paragraph 1, requires the competent authority (or authorities) to conduct the first inspection within 18 months.

For inactive wells, Article 18 requires EU Member States to establish and publish an inventory within six months. Reports containing emission levels must be issued after 18 months and on March 30 every year thereafter. Amended Article 18, Paragraph 6 , requires Member States or the responsible parties to develop a mitigation plan to remediate, reclaim, and permanently plug inactive wells within 12 months. Plans should be implemented within 24 months of this regulation coming into force.

In line with Article 12, operators must submit within 10 months the first monitoring report for source-level methane emissions using engineering estimates, within 12 months reports containing direct measurements of source-level methane emissions from operated assets, and within 24 months—and on March 30 every year thereafter—reports containing direct as well as site-level measurements. For nonoperated assets, these periods are 24 and 42 months.

Article 14 of the 2021 proposal  requires operators to repair or replace all components found to be leaking methane. Any such action must be taken within five days after leak detection, and the effectiveness of any repairs must be verified no later than 15 days thereafter. The EP amendments  provide more specific guidelines on LDAR frequency and standards. For example, LDAR surveys must be conducted every two or four months for aboveground components depending on the detection limits introduced in new paragraphs of Article 14. LDAR surveys must be conducted every five months for underground components emitting more than 500 parts per million or 5 grams per hour of methane.

Article 17, paragraph 1, requires operators to “install all flare stacks that uses combustion devices with an auto-igniter or continuous pilot and at least 99% destruction and removal efficiency for hydrocarbons” within 18 months of this regulation coming into force.

Different requirements and timelines apply to coal mines.

No direct evidence regarding fiscal and emissions reduction incentives could be found in the sources consulted. However, for operators in the European Union, the regular publication of penalties and infringements per operator could serve as an incentive (see section 19 of this case study).

For importers, Article 27 requires reporting their products’ methane footprint (see section 16 of this case study). 

No direct evidence regarding market-based principles could be found in the sources consulted. Carbon dioxide emissions from the oil and gas sector are covered under the EU Emissions Trading System (EU ETS) Act No. 99 Relating to Greenhouse Gas Emission Allowance Trading and the Duty to Surrender Emission Allowances, 2004, which entered into force in 2005.

No direct evidence regarding negotiated agreements between the public and private sectors could be found in the sources consulted.

Article 1 of the 2021 proposal  defines the regulation’s scope by including all key elements of upstream and midstream operations, most notably oil and fossil gas upstream exploration and production, gas gathering and processing, transmission, distribution, underground storage, and LNG terminals.

Downstream operations are subject to Directive 2010/75/EU, 2010, which is under revision.