Some of the state’s largest energy companies are at the front of the line for a $50 million state incentive to upgrade oil and gas equipment. The fund to limit methane emissions established under a Biden administration rule is now under review by the Trump administration.
Continental Resources Inc., ONEOK Inc. and Devon Energy Corp. are among the companies that applied for rebates under the Oklahoma Emissions Reduction Technology Incentive program.
The rebates are on a first-come, first-served basis and allow companies to claim up to 25% of their costs to retrofit equipment or install new equipment limiting emissions. There are no prohibitions on company size, meaning some smaller, less-capitalized companies could miss out on the incentive.
The Biden administration’s rule on oil and gas industry methane emissions targeted both new and existing sources of pollution. Methane, a potent greenhouse gas, can be emitted accidentally or in planned release at all stages in oil and gas production, including drilling, well completion, processing and transportation. Cutting emissions of methane and carbon dioxide are major factors in slowing the rate of warming in Earth’s atmosphere.
The rebate applications come as Continental, oil and gas trade groups and Republican attorneys general continue to fight the Environmental Protection Agency rule in federal court. The EPA under Biden said the rule was fully vetted and incorporated flexibility requested by the oil and gas industry. It said the industry was losing out on marketable natural gas by not limiting methane emissions.
Depending on the courts, the rule could be struck down, but the companies would still be eligible for the rebates. The state incentive isn’t tied to any particular federal rule, although the threat of stringent federal regulations was used to push the rebate program at the Legislature.
Oklahoma lawmakers set up the emissions rebate program in 2022, but they didn’t set aside any money at the time for rebates. A budget agreement reached last year put $50 million into two emissions rebate funds at the Oklahoma Tax Commission.
Backers of the rebate program, such as the Petroleum Alliance of Oklahoma, said the incentive came in response to an uncertain federal regulatory environment. There are hundreds of thousands of well sites in Oklahoma, many of them older wells with limited production. The alliance said the latest EPA emissions rules treat all oil and gas production facilities the same, regardless of the size of the company.
Brook Simmons, president of the Petroleum Alliance, said he’d like to see oil and gas companies of all sizes apply for the rebate program.
“This was an effort to provide the companies the opportunity to lean into that area in a way that is good for them and good for Oklahoma,” Simmons said. “If you want a healthy oil and gas sector in Oklahoma – the number one industry in the state – you want to be thoughtful as a public policymaker about how you help the companies comply with an unfunded mandate.”
Simmons said the Petroleum Alliance will continue to promote the rebate program to its members.
“The point of the program is, we want you to spend the money to do this, and then the state will give you a little bit of an incentive to keep doing it,” he said.
Oil and Gas Companies File Dozens of Applications
So far, oil and gas companies have made more than two dozen applications for emission reduction rebates to the Oklahoma Department of Environmental Quality. The Tax Commission only pays the rebates once it gets notice that emissions reduction projects are complete.
In its application to DEQ, ONEOK Field Services asked for almost $859,000 in rebates for a $3.43 million upgrade to a natural gas processing plant near Maysville in Garvin County. The plant, which dates to 1948, was still venting some methane into the atmosphere. The company spent four months in late 2023 to install equipment to route gases to a flare, reducing emissions by 39% compared to a 2019 baseline.
“This project was complex and creative,” ONEOK said in its rebate application. “Design development, including considerations for negative impacts such as added demand on existing facility flare, took considerable time and effort. Now that the design has been completed, similar projects can be more efficiently implemented at other legacy assets within ONEOK Inc. as well as other midstream companies.”
In a written statement, ONEOK said it was grateful for the state incentive. The company set a goal in 2021 to cut combined greenhouse gas emissions from its legacy equipment by 2.2 million metric tons by 2030.
“The state of Oklahoma’s support of infrastructure projects like this one will help us continue to supply growing energy demand in a safe and environmentally sustainable way,” the company said.
Not all companies were successful. DEQ rejected an application by an Elk City software company that provides emissions monitoring services. GAS AI LLC sought a rebate of $284,000 on a $1.14 million project. The agency said the proposal didn’t identify physical changes that resulted in emission reductions.
“Your project identified hypothetical reductions that could occur if your software solution were to be applied as an auditing measure to state databases of compliance test reports,” DEQ said in its June 17 rejection letter. “Where the audit identified violations, the agency could then enforce existing regulations to achieve emission reductions from violating entities.”
Jordan Williamson, the company’s chief executive officer, said he thought his application aligned with oil and gas industry goals to cut emissions and Oklahoma’s push to make use of artificial intelligence applications. GAS AI has about 100 employees, with half in Oklahoma and the rest in other oil and gas producing states.
Williamson said his software helps regulators and companies audit their emissions reports to better understand conditions in the field. He said the policy goal should be better monitoring of existing laws and regulations, not necessarily new regulations.
“Let’s regulate what we have in a fair manner, in a proper, ethical manner,” Williamson said.
Among other companies applying for rebates were Canvas Energy LLC, Mewbourne Oil Co. and Ovintiv USA Inc. Most of the projects reduced methane emissions by making changes to the venting of gas or cutting the loss of gas through leaks.
Continental, one of the nation’s top 10 oil producers, applied for five emissions reduction projects across the state. DEQ approved four projects for $137,000 in rebates, but it rejected the largest application, for $2.66 million in rebates, because it was several days late. The company completed the $10.6 million project in June 2024 but did not submit the application to DEQ until Jan. 3.
Continental representatives did not respond to multiple requests for comment.
State lawmakers made some tweaks to the law in this year’s legislative session. Senate Bill 469, signed by Gov. Kevin Stitt in April, changed the application period and put a deadline of Dec. 31, 2026, for rebate applications. The program sunsets on July 1, 2027.
Industry Groups, Republican AGs Challenge Rule
As it pursues incentives on emissions reduction projects, Continental is hedging its bets in court. It joined oil and gas trade associations and friendly Republican attorneys general in challenging the EPA rule in federal court. Oklahoma Attorney General Gentner Drummond led a 24-state coalition against the rule in April 2024. The case remains pending before a federal appellate court in the District of Columbia, a frequent stop for those challenging federal agency rules.
In court filings, Continental said the EPA rule violated cooperative federalism, the legal theory that states and the federal government should work together in regulating economic behavior and implementing policy.
“The final rule’s usurpation of clear state statutory authority imposes immediate irreparable harm on operators such as Continental who have planned and developed their operations for existing sources in reliance on the flexibility and options already encompassed in state regulations,” the company said in a May 2024 filing.
“Let’s regulate what we have in a fair manner, in a proper, ethical manner.”
Jordan Williamson
Kendal Stegmann, DEQ’s director of air quality, supported Oklahoma’s attorney general and other plaintiffs in challenging the implementation timeline of the EPA rule. Stegmann said DEQ would need to expand its compliance and enforcement staff to deal with the requirements under the stricter emissions limits. She said existing programs to regulate other harmful emissions also capture methane as a co-pollutant.
“Because the more cost-effective approaches are already in place, a stay will defer some emissions reductions, but those emissions reductions would have been far more costly to effectuate,” Stegmann said in an April 2024 statement filed in the lawsuit. “Thus, a stay would have an incremental effect on emissions reductions coupled with a more substantial cost benefit to the regulated community.”
Meanwhile, the Trump administration is proposing to delay implementation of the rule by several years. The EPA, under new Administrator Lee Zeldin, filed a notice with the Office of Information and Regulatory Affairs in June to revisit the rule.
Delaying implementation typically works in the energy industry’s favor, since companies can make capital expenditures based on market conditions instead of spending money to comply with new environmental regulations that may force older producing wells to close.
Simmons, with the Petroleum Alliance, said his group continually tracks federal agency actions. He said the overall goals of Oklahoma’s emissions rebate program would remain in place no matter what happens.
“Most companies want to be more efficient,” Simmons said. “They want to reduce waste to operate in an environmentally responsible manner, and frankly, to capture as much of a valuable commodity as possible. So the program is useful, and I think it’s going to remain relevant regardless of what happens in DC.”
Paul Monies has been a reporter with Oklahoma Watch since 2017 and covers state agencies and public health. Contact him at (571) 319-3289 or pmonies@oklahomawatch.org. Follow him on Twitter @pmonies.
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