The EU Regulation on the Reduction of Methane emissions in the Energy sector ("MERR") seeks to reduce methane emissions from the EU's fossil fuel production and import. The MERR includes obligations to report on and limit the release of methane through various stages of exploration, production and import.
The MERR1 entered into force on 4 August 2024. The main obligations apply to EU-based companies operating exploration and production assets of crude oil, natural gas (also affecting LNG production), and coal. The MERR will also impact EU importers as it applies to "methane emissions occurring outside the Union, with respect to crude oil, natural gas and coal placed on the Union market."
The MERR is being implemented gradually over the coming years with all requirements scheduled to be applicable by 2030. In 2026, the European Commission is expected to establish a methane transparency database, a methane monitoring tool based on satellite data as well as a rapid reaction mechanism to address methane super-emitting events.
Requirements for EU operators
The MERR will apply in different phases for operators of crude oil, natural gas and coal facilities in the EU, by imposing various reporting and compliance requirements.
Oil and gas sector
The MERR requires operators to submit a leak detection and repair ("LDAR") programme to the competent authorities by 5 May 2025, to identify and detect sources of methane leaks and other unintentional methane emissions for existing sites, and within six months from the date of start of operations, for new sites.
A new prohibition on routine flaring and venting will be applicable from 5 February 2026. Flaring and venting will be allowed only in case of an emergency or malfunction or, under certain circumstances, where unavoidable and strictly necessary. In addition, venting and flaring events will need to be notified to the competent authorities.
The MERR also requires annual reporting on source-level methane emissions by 5 August 2025. The reporting will become progressively more detailed depending on the type of fossil fuel produced. A verification statement should also be included in the report.
In addition, by 5 May 2026, operators must annually report on methane emissions from all inactive wells and temporarily plugged wells, and, by 5 August 2026, prepare a mitigation plan to remediate, reclaim and permanently plug inactive wells and temporarily plugged wells.
Coal sector
Operators of active coal mines and drainage stations must make continuous measurements and report methane emissions. By 5 August 2025, operators will be required to submit a report on yearly source-level methane emissions.
For active underground coal mines, from 1 January 2025, flaring with a destruction and removal efficiency by design level below 99% and venting of methane from drainage systems is prohibited, except in case of an emergency or malfunction or, under certain circumstances, where unavoidable and strictly necessary. When venting or flaring events occur, drainage station operators must notify the competent authorities. Additional restrictions on methane venting through ventilation shafts in coal mines will gradually apply, beginning on 1 January 2027.
For closed underground coal mines, methane emissions will need to be measured from 5 May 2026, and source-level methane emissions will need to be reported annually from 5 August 2026. In addition, from 1 January 2030, venting and flaring from certain equipment will be prohibited.
Requirements for EU importers
The MERR obligations in relation to EU crude oil, natural gas and coal imports primarily apply to the "importer", defined as the person who places in-scope products originating from a third country on the EU market. Importantly, when the producer is not the EU importer of a covered product, the producer or exporter will be indirectly affected because there will be requests for information from importers in the EU in order to comply with MERR requirements.
Like the requirements for EU operators, the MERR will apply in different phases for importers of crude oil, natural gas and coal, imposing various reporting and compliance requirements.
General reporting requirements for importers begin on 5 May 2025. The importer of in-scope products will be required to provide information relating to production and transportation (or must provide sound justification if the information is unavailable) by 5 May 2025 and then by 31 May annually going forward.
Importers of in-scope products will have to demonstrate, by 1 January 2027, that any contracts concluded or renewed on or after 4 August 2024 only cover crude oil/natural gas subject to monitoring, reporting, and verification mechanisms equivalent to EU requirements.
For supply contracts concluded or renewed on or after 4 August 2024, importers must report the methane intensity of imports annually, starting on 5 August 2028. Producers will have to provide the methane intensity associated with the production of the in-scope products to assist EU importers in their reporting.
Under the MERR, the Commission is required to adopt delegated acts setting out maximum methane intensity values associated with in-scope products placed on the EU market at the level of the producer, based on objective criteria which will apply from 5 August 2030. At this stage, there is no information about the level of the maximum value, but both security of energy supply and environmental concerns will be considered. As a result, imports with higher methane intensity than the maximum level, may de facto not be able to access the EU market once the maximum values are adopted or be at risk of penalties.
Enforcement
The competent Member State authorities will have the power to impose conditions and penalties in case of non-compliance, including: (i) an obligation to bring the infringement to an end; (ii) confiscation of the profits gained or losses avoided due to the infringements; (iii) public warnings or notices; (iv) periodic penalty payments; and (v) administrative fines not exceeding 20% of the annual turnover in the preceding business year.
EU Omnibus and next steps
The first MERR-related obligations start to apply at the same time as the EU is considering amending certain sustainability laws through the so-called "Omnibus package".2 While some industry associations have called for simplification of the MERR, the MERR was not included by the European Commission in its Omnibus package proposal. Methane emissions will remain the focus of European lawmakers and regulators, as underlined by a recent briefing of the European Environmental Agency which claims that more action is needed to reduce methane emissions across Europe. While it is important to monitor developments concerning the Omnibus and other simplification efforts, businesses should still be preparing for MERR requirements to gradually kick in over the coming years.
Antonio Fuentes Maiquez (Associate, Brussels) and Ruth Benbow (Knowledge Manager, London) contributed to the development of this publication.
1 Regulation (EU) 2024/1787 of the European Parliament and of the Council of 13 June 2024 on the reduction of methane emissions in the energy sector and amending Regulation (EU) 2019/942, available here.
2 See our client alert on the recent European Commission’s proposal: EU Omnibus Package: 10 things you should know about the proposed changes to key sustainability legislation | White & Case LLP
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