Methane Rule Comes With More Fuzzy Math

On Friday, June 3rd, the Environmental Protection Agency (EPA) issued its final methane emissions standards for new, modified, and reconstructed oil and gas sources. Much of the rule is aimed at curbing emissions related to fracking, a process that has enabled significant extraction of natural gas in the U.S. in recent years. While EPA’s latest standards won’t affect established wells, many fear the agency might have turned its attention from shutting down coal-fired power generation to restricting the process of fracking altogether.

See the New Standards Here

As with other rules in past years, EPA claims the benefits of its regulations far outweigh the costs to industry or consumers. We’ve come to expect that from the agency. But unlike with past rules, in which EPA has used an array of concocted benefits to ensure its regulatory math passes muster, the benefits from its new methane rule are all climate related.

According to a report from the Competitive Enterprise Institute, this marks the first time the agency has “finalized a rule where the monetized benefits are estimated solely from the greenhouse gas emission reductions.” According to the Institute, the rule also marks the first use of a novel metric called the social cost of methane.

If the social cost of methane sounds familiar, it should. EPA has previously used a social cost of carbon metric to justify its crackdown on fossil fuels. In November 2013, PACE wrote about the EPA’s social cost of carbon and the way it could be used to shape public policy discussions in favor of anti-energy agendas. At the time, we suggested that the assumptions made about the costs of carbon were flawed. Now, many, including the Competitive Enterprise Institute, are saying the same about the EPA’s calculation of the social cost of methane.

The Institute explains, “For example, EPA disregards Office of Management and Budget (OMB) Circular A-4, which instructs agencies to use both 3 percent and 7 percent discount rates to estimate the present value of future regulatory benefits. The lower the discount rate, the higher the present value. To estimate the benefits of methane reductions attributable to the rule, EPA uses discount rates of 2.5 percent, 3 percent, and 5 percent, but not 7 percent. Through the miracle of compounding, those rates yield much higher SCC values than would a 7 percent discount rate.”

In other words, EPA has monkeyed around with the numbers. That’s not the only sleight of hand from the agency on the methane issue though.  In an explanation of EPA’s treatment of methane in the Knoxville News-Sentinel, writer Drew Johnson says that the agency has also revised its methodology for calculating methane emissions, with predictable results.

Johnson explains, “Last year, the EPA reported that methane emissions had fallen by about 10 percent from 2005 to 2013. And emissions specifically generated from “fracking”…dropped a whopping 79 percent. Under this new formula, though, it appears that methane emissions actually increased by about 1 percent over that same period and rose again in 2014. Moreover, this formula calculates that oil and gas producers are America’s largest methane polluters.”

Surely the EPA wouldn’t purposefully make it appear that American industry is releasing more methane only to cynically justify its own new methane rule? Of course it would. The EPA has demonstrated time and time again that it will use any math, bend any interpretation, or take whatever irrational leap required to polish its regulations to a high sheen.

Why is that dangerous? Consider the state of the American economy. Despite modest gains, ninety-three million Americans are still not working. This stagnant economy created a paltry 38,000 jobs in May. Manufacturing, which has remained the lifeblood of economic vitality, continued to suffer, losing another 20,000 jobs last month. Restrictions on methane hold the potential to further throttle that stifled economy, in the process endangering jobs and snuffing out growth from a sector that is among the few bright spots in the American economy.

The fact is that the U.S. oil and gas industry accounts for just 0.000004% of the methane in earth’s atmosphere. Or, as Paul Driessen recently put it, just 4¢ out of a million dollars. That’s not exactly the looming threat that EPA would like consumers to believe. Instead of using fuzzy calculations to prop up a misguided proposal, perhaps the EPA should focus more on cooperating with industry to ensure that methane emissions in the U.S. continue to fall. That is an honest, results-driven approach that we, and likely most Americans, would support.