Biden Moves to Wreck U.S. Oil Industry

T he Biden administration is escalating its war against the American oil industry.

According to an article in the November 2, 2021, Wall Street Journal, Biden’s EPA will soon issue regulations requiring that all associated natural gas released in conjunction with oil production be put in pipelines for delivery to market:

The Environmental Protection Agency would seek for the first time to regulate methane at existing wells nationwide, a move smaller producers fought for years. The move would place roughly a million new and existing wells under EPA methane regulation, with stricter requirements for new wells in addition to the first-time regulations for old ones. . . .

. . .  The rules would mandate what the EPA calls “a comprehensive monitoring program to require companies to find and fix leaks” across operations including wells, pipes and storage tanks. The agency’s plan includes provisions to encourage the use of new technology such as drones for more effective monitoring.

It would also prohibit venting off gas at oil wells, which producers sometimes do when oil is much more valuable than gas. The EPA would require producers to put that gas in a pipeline to be sold when possible to keep natural gas from being wasted. In 2030 alone, that would save $690 million worth of gas that might otherwise be wasted, the agency said.

The destructive impact of the proposed new regulations cannot be overstated. Oil producers already put associated natural gas in pipelines wherever they are available. The problem is that they are not always available. For example, they are never available offshore or in regions that are new to oil exploration. They are not available in numerous locations in recently developed oil producing states such as North Dakota. They may not even be available — or possible — in many places in well-developed oil-producing states like Colorado or Texas, because terrain or real-estate obstacles may lie between the well site and existing pipelines.

Building pipelines where they do not exist can be very expensive or even impossible. Creating a requirement that such pipelines be built before production can begin will prevent oil production in all new regions and in numerous locations elsewhere. It will also force the shutdown of production at innumerable smaller wells, where the sales value of the associated gas can never justify the cost of pipeline construction.

The Biden administration says it must impose this requirement to prevent the climate impact of methane emissions from associated gas. But that problem can be (and generally is) dealt with by flaring the gas. If the flare is properly designed, virtually no methane or other petroleum gases are emitted. It is true that this wastes a useful fuel and increases CO₂ emissions associated with the oil production. As a rule of thumb, you might typically produce a thousand cubic feet of gas (~20 kg of carbon) with each barrel of oil (~130 kg of carbon). So the CO₂ emissions from flaring the associated gas increases the total CO₂ produced from that barrel of oil by perhaps 15 percent.

But if you want to produce the oil, there is little other choice. In principle, you can refrigerate and liquefy the gas, then truck it off to market. For ten years, I led a company that developed, made, and operated equipment that could be sent to stranded oil wells to liquefy the non-methane components (such as propane, butane, and pentane) of gases associated with petroleum production. This was easier than liquefying methane, because we only needed to cool the gas down to -50° C to liquefy propane, while liquefying methane requires -150° C refrigeration. But even so, this was a very difficult business to make work, because deployable equipment is limited in size. We could not deal with the largest flares, while the smaller flares produced too little gas to make deploying the equipment worthwhile. Moreover, the size of flares vary, typically starting out very large with a new well, then tapering off to nothing over time.

Another alternative would be to deploy generators and turn the associated gas into power for sale on the grid. But utilities are not friendly to this proposal. They do it for (less reliable) solar energy because they are forced to by solar’s political friends. But no such regulations exist that require utilities to purchase electricity produced from associated gas. But even so, this would work only for a certain class of medium-sized flares, and while stringing electric lines may be cheaper than building gas pipelines, it isn’t free, either.

In any case, Biden’s proposed regulation would rule out such fixes. Only the most prohibitively expensive solution — the construction of pipelines before new production can commence or old production can continue — will be allowed. The effect of this regulation will be to shut down American oil production and replace it with foreign oil whose production involves vastly more flaring. It will cause massive damage to the American economy and the global environment, drive up the price that Americans pay for gasoline, and shift huge amounts of capital from America to others, including our geopolitical adversaries and the sponsors of terrorism. It needs to be stopped.