The natural gas market is experiencing several regulatory shifts that are reshaping how businesses, utilities, and energy suppliers operate within the energy markets. As energy policies evolve, governments and regulators are implementing new rules aimed at improving market stability, emissions reductions, and infrastructure modernization. These regulatory changes in the natural gas industry are driven by the push toward decarbonization, growing demand for renewable energy, and geopolitical factors affecting supply and pricing. This article explores the latest natural gas policy updates, their implications for the oil and gas industry, and strategies businesses can use to stay ahead of the curve.
Recent Updates In Natural Gas Regulations
There are several new policy changes affecting the natural gas industry. Each is aimed at achieving different outcomes.
New EPA Regulations
The Environmental Protection Agency (EPA) has rolled out stricter natural gas regulations aimed at curbing methane emissions from oil and gas drilling operations. These rules require gas pipeline operators, exploration companies, and industrial users to adopt more advanced monitoring and mitigation technologies. Some of these guidelines include:
Methane Emission Reductions
The EPA is mandating tighter controls on methane leaks for industrial users. With several recent incidents, such as the Atmos Energy gas leak in Mississippi, the EPA is cracking down on industrial natural gas safety protocols. This could lead to higher compliance costs for affected businesses.
Carbon Capture Requirements
Companies in the natural gas market are being encouraged to invest in carbon capture technologies to offset their emissions. Some of these technologies include combined heat and power cycles where heat energy from natural gas burning is repurposed for water heating and chilling. These designs can help buildings to become more energy efficient and reduce energy expenditures.
Infrastructure Modernization
Regulations are pushing for better safety and efficiency in natural gas transportation and pipeline networks to reduce risks. Due to the increase in natural gas pipeline incidents, regulators are moving towards requiring pipeline operators to implement control and monitoring technologies that can proactively reduce leak emergencies.
Federal & State-Level Policy Shifts
The Biden administration introduced policies aimed at accelerating the transition to cleaner energy sources, such as wind and solar. At the state level, different regions are adopting diverse approaches to natural gas regulation, such as:
- California: The CAPUC is implementing stricter emissions standards on natural gas applications and promoting renewable natural gas (RNG) as an alternative.
- Texas & Pennsylvania: In states with high gas production, legislators are incentivizing energy producers to choose cleaner fuel alternatives. They are also pushing for the balancing of fossil fuel production with VRE assets.
- New York & New England: These states are pushing for demand response programs and stricter pipeline permitting processes. Recently, New York City implemented a ban on natural gas in newly constructed buildings.
Renewable Natural Gas (RNG)
One of the biggest trends in the natural gas market is the rise of renewable natural gas (RNG). RNG is produced from organic waste and biogas facilities, making it a cleaner alternative to conventional fossil-based natural gas. New regulations now provide incentives for RNG production, and power-to-gas technologies are creating new ways to store excess power in the form of hydrogen or methane. In addition, many states are currently adopting RNG procurement mandates, requiring utilities and natural gas suppliers to source a portion of their supply from renewable energy alternatives.
Key Drivers Behind Natural Gas Regulatory Shifts
The key drivers behind natural gas regulation are environmental and infrastructure concerns. Some of these drivers include:
Energy Transition & Decarbonization Goals
The global energy transition is putting pressure on natural gas markets to align with carbon policies. While natural gas is still considered a bridge fuel, its long-term role is often criticized. Many critics cite health concerns for local communities near drilling sites or pipelines as it is believed that gas can seep into drinking water. Today, many grid operators are beginning to phase out coal-burning power plants and natural gas peaking plants, which were used to meet peak demand and balance the load on the grid.
Market Volatility and Price Fluctuations
The natural gas industry has faced significant market volatility due to global events, such as the Russia-Ukraine conflict and the EU gas price cap. In addition, supply chain disruptions from policy related to LNG exports have also driven up natural gas futures. Regulatory changes aim to stabilize pricing, but capacity shortages and policy uncertainty still pose risks.
In deregulated natural gas markets, suppliers are looking for ways to mitigate risk through natural gas hedging strategies that are aimed at stabilizing prices for their customers. With new policies affecting investments in natural gas production, market participants are in a holding pattern waiting for gas prices to fall.
Infrastructure Modernization
One of the biggest regulatory focuses is improving the reliability and efficiency of the natural gas transportation network. Aging pipelines, capacity constraints, and environmental concerns have led to stricter rules. New regulations are affecting permitting processes and delaying new pipeline projects. This is having a trickle down effect causing supply shortages. One way gas traders are combatting these obstacles is through natural gas storage strategies that allow them to store gas and sell it at later dates when prices are favorable.
Impact On Energy Customers & Businesses
These regulatory shifts in the gas markets are having a drastic impact on energy customers and end users.
Price Increases
For commercial and industrial consumers, regulatory changes are leading to higher costs and more complex energy contracts. Retiring fossil fuel generation plants are creating a lack of electric capacity in the markets. This led to an almost 500% increase in capacity prices in PJM for the 2025/2026 delivery year. Furthermore, the recent shortage is gas production has led to increased futures prices, which ultimately affect both natural gas and electricity long-term fixed rate contracts.
Businesses can attempt mitigate these impacts by:
- Monitoring energy demand and participating in natural gas demand response programs.
- Optimizing energy contracts with structured supply agreements and becoming more savvy at shopping for natural gas.
- Investing in on-site power generation, including co-generation and hybrid energy solutions.
The Future Of Natural Gas
The long-term outlook for natural gas regulation depends on the adoption of renewable energy in the markets. While natural gas will continue to play a critical role in power generation, policies will likely focus on:
- Reducing carbon intensity of gas production.
- Integrating more renewable solutions into supply chains.
- Encouraging technological advancements in power-to-gas solutions.
- Utilizing natural gas to meet peak load, where intermittent renewable energy sources are lacking.
Get Expert Guidance On The Natural Gas Markets
As natural gas regulatory shifts continue to reshape the oil and gas industry, businesses must remain proactive. Understanding the policies impacting natural gas markets, adopting energy-efficient strategies, and working with experienced energy brokers can help mitigate financial risks. Our team of natural gas experts is dedicated to helping businesses navigate the natural gas markets and develop customized strategies for energy procurement. Contact us today to explore tailored energy solutions for your business’s energy strategy.
