EU Moves to Ease Methane Rules for Oil and Gas Firms

The European Union will ask its member countries to waive penalties for three years for oil and gas companies that breach its methane emissions law, in response to the Iran war's disruption to energy supplies, a draft document seen by Reuters showed.

The move follows pressure from the U.S. government and oil and gas industry groups, who have warned the law could hamper Europe's ability to secure fuel supplies.

It would weaken the world-first EU climate policy, which was designed to clamp down on leaks of methane, a potent greenhouse gas and the second-biggest cause of climate change after CO2 emissions.

The draft European Commission document, seen by Reuters, said EU countries should not apply penalties to companies that breach the methane law in 2027, 2028 and 2029, except for "large-scale fraudulent breaches".

The change would apply to existing oil and gas supply contracts and those signed or renewed before January 2028, it said.

"In the current Middle East crisis context, in order to not endanger the security of energy supply... and to tackle the exposure of European consumers and businesses to potential energy supply shortages causing high prices, member states should not apply the penalties," it said.

The draft document is a Commission "recommendation" - a type of EU act which instructs countries to apply EU law in a certain way, but is not binding.

The EU methane law requires that, from January 2027, imported gas must comply with emissions monitoring and verification ‌rules ⁠equivalent to Europe's.

Companies that fail to comply could face fines up to 20% of their annual turnover.

Most EU governments still have not confirmed how they would apply penalties to enforce the law - prompting warnings from industry that the risk of huge fines will deter companies from signing new gas supply deals.

The Trump administration has demanded the EU go further and completely exempt U.S. oil and gas from the rules for a decade.

Environmental campaigners said waiving the penalties would reduce the EU methane law to a "paper tiger".

"If the EU is serious about strengthening energy security, it should not undermine the very rules designed to reduce dependence on fossil fuels," said Flora Witkowski, gas policy coordinator at Climate Action Network Europe.

(Reuters - Reporting by Kate Abnett; Editing by Kirsten Donovan)