The EU Methane Regulation (Regulation 2024/1787) introduces requirements to monitor, report, and reduce methane emissions for oil, gas, LNG, and coal. The regulation is in effect now and provides for potentially severe penalties for failure to comply.
Traders and other energy market participants should therefore ensure that they are clear about whether their activities are captured by the regulation, what their obligations are if so, when those obligations arise, and what systems they need to set up in order to ensure compliance. For energy traders, this will include making the necessary provisions in their sale contracts.
In this article, we will summarise what and who the regulation applies to before dealing with the obligations imposed on traders importing into the EU and the obligations imposed on operators in the EU.
What activities does the regulation apply to?
The regulation applies to crude oil, natural gas (including LNG) and coal produced outside of the EU and placed on the EU market.
Within the EU, it applies to the following activities/facilities:
- Oil and fossil gas upstream exploration and production
- Inactive, temporarily plugged and permanently plugged and abandoned wells
- Fossil gas gathering and processing
- Gas transmission and distribution, and underground storage and liquefied natural gas (LNG) facilities.
- Active underground coal mines and surface coal mines, and closed or abandoned underground coal mines
Who does the regulation apply to?
The regulation applies to importers, operators, and undertakings, defined as follows:
- Importer = places crude oil, natural gas or coal originating from a third country on the EU market
- Operator = operates or controls an asset
- Undertaking = carries out oil or gas exploration or production, or gas transmission, distribution and underground storage
The regulation applies to a party falling within one of those definitions even if it is based outside the EU (provided it is undertaking activities which relate to the EU market, as described above).
There has been concern in the market that some of the definitions of the parties to whom the regulation applies are unclear. We expect the EU to issue further guidance in this regard (as it has done recently to clarify parts of the EU Deforestation Regulation).
Penalties and enforcement
Inspections can be carried out by the authorities to monitor compliance with the regulation including, for example, by way of site checks, audits, and detection and measurement.
The regulation empowers authorities to impose penalties for non-compliance that include confiscation of profits gained or losses avoided due to such non-compliance, public notices, and fines that could reach up to 20% of the annual turnover of a company.
Traders importing into the EU
Traders importing oil, gas, and coal into the EU will be required:
- From May 2025, to report, on an annual basis, methane emissions data and information on imported products
- From January 2027:
- for sale contracts concluded/renewed after 4 August 2024, to demonstrate that imported products are from producers that are subject to monitoring, reporting and verification of methane emissions equivalent to the requirements of the regulation
- for sale contracts concluded before 4 August 2024, to use all reasonable efforts to ensure that imported products are subject to equivalent monitoring and reporting measures to the regulation
- From August 2028:
- for sale contracts concluded/renewed after 4 August 2024, to report on an annual basis on the methane intensity of imports
- for sale contracts concluded before 4 August 2024, to use all reasonable efforts to report methane intensity of imports
- From August 2030, for sale contracts concluded/renewed after that time, to demonstrate on an annual basis that the methane intensity of imports remains below the maximum methane intensity values
It is important to note that, although the reporting requirements are not yet in force, they apply to pre-existing contracts for the purchase of energy products to be imported into the EU in future.
Traders who will be obliged to comply with these requirements should therefore ensure that their new sale contracts protect them against falling foul of the regulation. This will mean a buyer for import into the EU obliging its seller to provide the necessary information to enable compliance and adopt suitable monitoring and reporting measures. The contract should also provide for rights and remedies in the event of the seller’s breach (e.g. indemnities and termination rights). These could be important given the potentially significant penalties for non-compliance with the regulation.
For contracts concluded before 4 August 2024, the reasonable efforts a trader is obliged to undertake include seeking to amend those contracts to enable compliance with the regulation.
The European Commission is due to publish model contract clauses, but these may have to be adapted in order to provide traders with adequate protection.
Oil and gas operators
The regulation imposes three types of obligations for oil and gas operators:
- Quantification, monitoring, reporting and verification of emissions
- Mitigation of emissions, including:
- Leak Detection and Repair (LDAR)
- Venting and flaring
- Quantification and mitigation of emissions from inactive, temporarily plugged and permanently plugged and abandoned oil and gas wells
The table below summarises these obligations and when they come into effect.
| Date | Obligation | Who is affected? | Article |
| By 5 May 2025 | Submit LDAR programme including details of surveys and specific timelines by 5 May 2025 or within 6 months of the start of operations for a new site. | Oil and gas operators | 14(1) |
| Carry out “type 1” and “type 2” LDAR surveys to detect methane leaks. Repairs or replacements to be carried out immediately after detection. | Oil and gas operators | 14(2), 14(9) | |
| By 5 August 2025 | Report of the estimated quantification of source-level methane emissions. | Oil and gas operators | 12(1) |
| By 5 February 2026 | Routine flaring and venting are prohibited with limited exceptions.Requirements on venting and flaring to be complied with by 5 February 2026 for existing sites and no later than 12 months from the date of start of operations for new sites. Flare stacks or other combustion devices to be installed with auto-igniter or continuous pilot burner and destruction and removal efficiency by design level of at least 99%. | Oil and gas operators | 15(1), 15(2), 15(3), 15(8), 17(2) |
| Report of quantification of source-level emissions for operated assets | Oil and gas operators and undertakings | 12(2)(a) | |
| By 5 May 2026 | Submit a verified report on quantification of methane emissions by 5 May 2026 and by 31 May every year thereafter. Prepare a mitigation plan to remediate, reclaim and permanently plug inactive wells and temporarily plugged wells within 12 months of report. | Oil and gas operators | 18(1), 18(9) |
| By 5 February 2027 | Report of quantification of source-level emissions for non- operated assets | Oil and gas operators and undertakings | 12(2)(b) |
| Report of quantification of source-level methane emissions along with measurements of site-level methane emissions. | Oil and gas operators and undertakings | 12(3)(a) | |
| 5 August 2028 | Report of quantification of source-level emissions & site-level emissions for non-operated assets | Oil and gas operators and undertakings | 12(3)(b) |
Coal operators
The obligations relating to coal mines vary depending on the mine type (underground or surface) and emission source (e.g. ventilation shafts or drainage wells).
The regulation introduces three types of obligations for mine operators:
- Monitoring, reporting and verification of emissions at active underground and surface coal mines.
- Venting, flaring and reporting of V&F events at active underground coal mines.
- Monitoring and mitigation of emissions from closed and abandoned underground coal mines.
The table below summarises these regulations and when they come into effect.
| Date | Obligation | Who is affected? | Article |
| By 5 August 2025 | Continuous source-level direct measurements and quantification. Submit an annual report covering the source-level methane emissions by 5 August 2025 and then on 31 May every year after. Deposit-specific emission factors established on quarterly basis. Estimate coal post-mining methane emissions using coal post-mining emission factors, updated annually. | Mine operators | 20 |
| By 1 January 2025 | Flaring with a less than 99% destruction and removal efficiency and venting from drainage systems is prohibited. | Mine operators | 22(1) |
| From 1 January 2025 | Drainage station operators shall notify the competent authorities of all venting events and all flaring events with a destruction and removal efficiency by design level below 99%. | Mine operator | 23(1) |
| By 1 January 2027 | Venting through ventilation shafts in coal mines emitting more than 5 tons of methane / kiloton of coal mined will be prohibited. | Mine operators | 22(2) |
| From 1 January 2031 | Venting of methane through ventilation shafts in coal mines emitting more than 3 tonnes of methane per KT of coal mined, other than coking coal mines, shall be prohibited, except in the case of an emergency. | Mine operators | 22(2) |
Action required
Any party that the regulation applies to will need to establish systems to ensure compliance. The regulation imposes varying obligations on different stakeholders, with some requirements being phased in over time, which adds complexity to compliance.
In the event of any query, please contact the authors of this article or your usual contact at Hill Dickinson LLP.
For further information, please contact:
John McNeilly, Partner, Hill Dickinson
john.mcneilly@hilldickinson.com
