Natural gas expected to generate half of U.S. electricity in 2024 and EPA announces new methane rules that will reduce natural gas supplies

A prescription for disaster.

GE high-efficiency natural gas turbine is used to generate electricity.

President Carter declared in 1978 that the US was running out of natural gas, which had become too precious to waste by burning it for electricity, prompting him to sign the Fuel Use Act of 1978, prioritizing coal to generate electricity. Thirty-seven years later, President Obama sought to reduce natural gas and coal use to generate electricity by passing the Clean Power Plan of 2015. The Supreme Court shot down that plan in 2022 in the landmark case West Virginia vs. EPA, saying that Congress had not delegated the power to EPA to regulate natural gas emissions.

Fast forward to December 2, 2023, when the EPA showed the world that it desperately sought the approval of the COP28 delegates when it announced it was implementing new rules regulating methane emissions, which could shut down a significant amount of U.S. natural gas production by implementing regulations that EPA knows will in fact do precisely that. Let’s dig into the current state of U.S. power generation, the impact of EPA methane policies, and why the Supreme Court will likely slap down the EPA again.

The U.S. Energy Information Administration, EIA, recently reported that natural gas is the single-largest electricity generator and expects 41% of all electricity generation in the U.S. in 2023 to be generated by natural gas, as shown in the graphic below.

The 10-year-long upward trend in natural gas-generated electricity of approximately 1.5% per year has continued despite the seemingly limitless subsidies for wind and solar generation, restrictions on natural gas pipelines, and the use of natural gas in New York and California.

The International Energy Agency, IEA, is even more bullish on U.S. natural gas power generation as replacing coal-fired generation, recently reporting that over one-half of US electricity will be generated by natural gas in 2023 (emphasis added throughout):

For the very first time, on 28 August 2023, the United States met more than of half of its electricity demand from natural gas. It encapsulated a summer during which gas-fired electricity generation grew dramatically. In just the past two years, its share of the power mix rose from 40 to 45 percent for the summer months of July and August.

A confluence of factors, including a significant drop in the price of natural gas, coal plant retirements, low output from wind and hydropower, and high cooling demand in some regions caused the share of gas to increase. By contrast, the share of coal-fired generation declined from 23 to 17 percent over the same period.

The record share of natural gas in the power mix continues the long term trend toward gas caused by the shale revolution. It comes alongside federal and state level environmental policies that pose significant risks to coal in the United States power sector.

According to IEA, U.S. natural gas is responsible for almost as much power generation as all other forms combined, including coal, hydro, nuclear, onshore wind, solar, and “other:”

IEA emphasized that the increased use of natural gas for power generation has helped been helpful to the cause of reducing carbon dioxide emissions because it has enabled a decline in coal-fired generation:

The price swing sparked a switch from coal to gas-fired generation in the power sector.

The average utilisation of coal-fired generation in the United States declined from 48.5% in the first seven months of 2022 to 39.8% in the same period in 2023, while the capacity factor of gas-fired generation increased from 54.6% to 57.7% in the same period. 

The switch from coal to gas and uptake of renewables has lowered CO₂ emissions in the US power sector. After peaking in 2001 at nearly 2.6 billion tonnes, power-sector emissions fell to 1.6 billion tonnes in 2022. In this period, gas-fired generation more than doubled while coal-fired generation was cut by half.

Yet, the good news about CO2 reductions due to natural gas displacing coal was not good enough for the U.S. EPA. Signaling that they value the approval of the COP28 crowd, the EPA chose to announce their new methane emissions regulations at the COP28 meeting on December 2, 2023. EPA announced they were immediately imposing their final rule to reduce U.S. methane emissions:

December 2, 2023 -- EPA has issued a final rule that will sharply reduce emissions of methane and other harmful air pollution from oil and natural gas operations — including, for the first time, from existing sources nationwide. The final action includes New Source Performance Standards to reduce methane and smog-forming volatile organic compounds from new, modified and reconstructed sources. It also includes Emissions Guidelines, which set procedures for states to follow as they develop plans to limit methane from existing sources. Oil and natural gas operations are the largest industrial source of methane pollution in the U.S.

The announced methane control rule is nothing more than the latest iteration of the 2015 Clean Air Act, which the Supreme Court struck down in West Virginia vs EPA. An important question is why the EPA imposes strict methane reduction rules on U.S. producers when the rest of the world produces the bulk of methane emissions.

The EPA did not mention that total U.S methane emissions constitute only 8.9% of total global methane emissions:

According to the International Energy Agency, the U.S. share of total global methane emissions from human activity (anthropogenic) is 8.9 percent. Of that amount, 53 percent is from energy (oil, natural gas, coal and bioenergy), 29 percent from agriculture, 16 percent from waste, and 2 percent from other.

The EPA’s focus on methane emissions also ignores the fact that U.S. methane emissions are insignificant when compared with other oil and gas-producing countries:

It is no surprise that China’s and India’s methane emissions more than offset any reductions the EPA rules the U.S. may achieve.

Even though the EPA rules will have little to no impact on global methane emissions, the EPA methane regulations will likely cause a drastic reduction in natural gas production. Independent operators who produce 90% of America’s natural gas will probably be unable to afford the compliance costs of the rules, which will require monitoring methane emissions. EPA had estimated that the necessary monitoring would be needed at 300,000 oil and gas well sites nationwide, about one-third of the approximately 900,000 oil and natural gas wells in the U.S.

Industry associations say small producers cannot afford the compliance and monitoring equipment. For example, Texas-based Chisholm Petroleum said it would be forced to go out of business if the regulations take effect:

It’ll be death knell for people in the business that are my size,” Chisholm Petroleum owner Cactus Schroeder told Houston Chronicle’s James Osborne.

The reality is I’m at the end of my career, and if this happens, a lot of my smaller properties can’t handle the cost of getting up to speed on those rules,” Schroeder said.

While the large-scale companies won’t have difficulties complying, and while they have collaborated with EPA on the rule, the small guys operating small old wells would suffer the most, according to Ramanan Krishnamoorti, a petroleum engineering professor at the University of Houston:

The challenge is going to be for the old legacy wells, the small- and mid-size wells.

For those companies, it’s going to hurt.”

My take: Substituting natural gas for coal-fired electricity generation has drastically reduced U.S. CO2 emissions. The low carbon footprint of natural gas is why it was considered a transition fuel and supported by environmental NGOs in the 1990s. That changed when the shale revolution proved that the U.S. natural gas reserves could last hundreds of years.

It is time to embrace natural gas as the lowest carbon fossil fuel needed to maintain stable power grids until nuclear power generation can become the primary baseload generation. It is time to recognize the forced energy transition for what it is—a fraud perpetuated by grifters and bureaucrats who see it as a way to get-rich-quick.

Natural gas is so important to the U.S. that one would think that the federal government would be doing everything it could to keep the natural gas industry viable. Instead, the federal government is doing everything possible to destroy the natural gas industry with rules and regulations designed to reduce the natural gas supply and increase prices.

The EPA’s methane rules are nothing more than a ruse to cripple the U.S. natural gas industry. The cost of installing and maintaining the EPA-required monitoring equipment and collecting and reporting the methane data while facing fines for any possible misstep in reporting means that it will be cheaper to shut down these wells than to attempt to comply.

If implemented, the EPA methane rule will make every U.S. power grid vulnerable to blackouts and possible collapse.

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