Satellite data and climate regulations in oil & gas: Navigating new legal and reputational risks

Satellites are reshaping the climate landscape for oil and gas businesses, offering real-time views of greenhouse gas (GHG) emissions. This greater availability of data amplifies the legal and reputational pressures on operators at every stage of the value chain (upstream, midstream, and downstream). Combined with tougher regulations, including the EU Methane Regulation and the US Environmental Protection Agency (EPA) methane rules for oil and gas operations, and the California climate disclosure rules, the sector now faces changing levels of scrutiny from regulators, investors and the public.

This client e-bulletin summarises how this widely available data, and the new levels of perceived transparency it brings, creates opportunities but also new legal risks. Those risks extend beyond possible regulatory investigations or fines, from climate litigation to contractual disputes. It also outlines strategic measures that oil and gas companies can adopt to manage and mitigate those risks.

Space and its promise of a new era of transparency

Satellite monitoring: opportunities and risks

Modern satellite technology seeks to detect methane leaks and other GHG emissions that were once invisible. Several public and private satellite programmes now promise near-real-time data, pinpointing precisely where and when emissions occur. This innovation helps operators fix leaks swiftly, reduces wastage and supports safety goals. Yet it also poses substantial compliance challenges: historically, many companies relied on self-reported or estimated emissions data. With satellites, alleged discrepancies between reported and observed emissions can quickly become the subject of public debate, raising the risk of regulatory scrutiny and claims.

Moreover, alleged methane 'super-emitters' are routinely said to be identified by independent observers and non-governmental organisations, who often publish data online. This means that even small operators can be caught off-guard by a sudden burst of negative publicity if data is interpreted in a way that suggests an unreported leak has been flagged from orbit. Regulators, too, are starting to incorporate satellite readings into enforcement mechanisms. In the US, the EPA has a program to certify third parties to use remote sensing technologies to find methane super-emitters and the State of California just announced that it will be receiving satellite remote-sensing methane data that it will use to enforce methane emissions limits.

Attribution challenges

Although satellite imagery is extremely powerful, it is not foolproof. Operators frequently highlight that attributing a plume to a specific facility or pipeline can be complex, particularly in regions where multiple operators share close infrastructure. Atmospheric conditions and sensor limitations might lead to inconsistent readings. However, as technology improves, regulators can be expected to seek to formalise processes for validating emissions data. In any event, availability of that data (whether accurate or not) will increase the risk of disputes. Consequently, organisations must consider carefully how they can leverage satellite data to improve their operations and reduce their emissions (with all the commercial and environmental benefits that it brings), while also having in place robust procedures that enable rapid investigation, corroboration and response to allegations of potential leaks. The use of routine drone and aircraft monitoring systems (either directly or via contractors) can be a useful defensive mechanism to establish the origin of leaks between operators within a basin.

Regulatory developments: EU and US in the spotlight

The EU Methane Regulation

The EU Methane Regulation represents one of the most sweeping legislative efforts to curb methane emissions from the energy sector. Approved in 2024, it imposes stringent monitoring, measurement, and reporting obligations on operators aligning with OGMP 2.0 Level 5. Routine flaring and venting are restricted, and frequent leak detection and repair (LDAR) inspections are required. Crucially, the Regulation extends to importers. From 2027, external suppliers wishing to access EU markets will be expected to meet equivalent standards or face potential fines applying to their cargoes for importers. Many in the energy industry support meaningful reductions of methane but emphasise that compliance requires not only operational overhauls but also careful consideration of technical feasibility and cost.

Enforcement is set to tighten: the EU has proposed a worldwide methane alert mechanism that draws on satellite data. When a large emission event is detected, the relevant company may be asked to investigate and mitigate it. Although direct fines on non-EU suppliers are not anticipated, buyers subject to EU rules face the threat of penalties for purchasing from non-compliant exporters. This dynamic effectively seeks to push compliance obligations up and down the global supply chain and beyond the borders of the EU.

EPA’s Methane Rules and California Climate Disclosures

In March 2024, the EPA published rules limiting methane emissions from oil and gas production and processing and natural gas transmission and storage facilities.  The rules require the identification and repair of leaking equipment, prohibit routine flaring from new sources and limit emissions from process controllers and pumps. The rules also include a Super Emitter Program designed to incentivize third parties to identify sources that emit more than 100 kg/hour of methane or volatile organic compounds.  Once notified by the EPA that a source has been identified as a Super Emitter, it must report its status back to the EPA. New sources must comply with the rules now. Existing sources must comply after states develop compliance plans. The EPA is currently reconsidering these rules.

Under a separate program, many of these companies are required to report their greenhouse gas emissions to the EPA and those reports are publicly available.

Meanwhile, in addition to using satellite data to enforce methane emissions limits, California has leaped past the federal government and enacted laws requiring large companies that do business in the state to publicly report Scope 1 and 2 GHG emissions beginning in 2026 and Scope 3 GHG emissions beginning in 2027. Recent estimates are that the rule would apply to almost 2,000 entities, 125 of them in the energy sector.

Many oil and gas firms are already enhancing their internal systems to meet the new transparency demands. However, many consider that the regulations (and the timeframes they anticipate for compliance) fail to understand the practical implications of what is required. Indeed, it may not be technically feasible or economically viable to retrofit many brownfield energy sources with the technology that would enable compliance. That notwithstanding, parties may increasingly rely on those regulations to demand robust, verifiable climate disclosures reflecting the regulatory direction of travel.  

Growing risks of disputes

Climate litigation

Satellite data may be particularly relevant in the context of an increasingly active climate litigation landscape. There is already precedent for satellite evidence being used in ESG-related disputes – for example, to monitor environmental degradation alleged to have resulted from mining activities in the Ecuadorian Amazon rainforest as part of claim by the Kofan indigenous community, to evidence air pollution from nitrogen dioxide in a court claim in Germany, or to evidence illegal logging and deforestation in Suriname as part of a claim before the Inter-American Court of Human Rights by the Saamaka community. It has also long been a tool to monitor and evidence water pollution, pesticide misuse, illegal fishing and illegal supply chains.

Recent years have seen a sharp increase in claims, whether by civil society groups or state bodies, which are pursuing legal avenues in various jurisdictions to attribute responsibility for specific climate change-related harms to corporate actors. Cities, states and regions often allege that operators’ failure to limit leaks or abide by local regulations contributes to climate damage. The diffuse nature of both emissions and climate change effects has made the evidential aspect of such claims a particular challenge. Claimants may seek to use satellite data to try to link observed emissions directly to particular facilities or operations. The growth in open access satellite data, driven by NGOs and civil society groups like the Carbon Mapper Coalition, may accelerate these attempts.

Another major category of climate litigation has been greenwashing claims, focusing on alleged inconsistencies between companies' statements and their conduct. Therefore, marketing phrases such as “net-zero aligned” or “low-carbon” must align closely with demonstrable performance. Satellite or third-party emissions data may be used to challenge a company’s climate or emissions-related disclosures. If a significant gap emerges between reported and independently observed emissions, regulators and litigants may assert greenwashing, seeking damages or injunctive relief.

Of course, it will remain to be seen how courts and tribunals faced with such evidence are able to engage with it. Some novel forms of evidence already represent a challenge in many climate litigation cases, including because of procedural objections to their use and concerns about the reliability of the underlying technology. Another issue may be the availability of relevant experts to assist adjudicators with interpreting and verifying satellite data so that courts and tribunals can properly assess the meaning – and the limitations – of this data.

Shareholder activism

Investors increasingly regard climate disclosures as financially material. Where a company is alleged to have misrepresented its carbon impact or the basis for its decarbonisation targets, including by under-reporting emissions or omitting the financial implications of decarbonisation targets, shareholders may seek to file claims. In extreme cases, board members may face derivative suits alleging breaches of fiduciary duty in overseeing climate risks. As the EPA’s methane rule, California’s climate reporting rules and the EU Methane Regulation (among others) take effect, this exposure may intensify.

Contractual and supply chain disputes

With regulations such as the EU Methane Regulation extending to imports, we are seeing new contractual clauses emerge which seek to ensure upstream suppliers meet specific methane and emissions standards and liability regarding the quality of data being passed through to the producer. If satellite data that is 'reasonably' available later shows that a supplier’s emissions exceed agreed thresholds, buyers may seek to allege breach of contract. Joint ventures may also face disputes if one partner’s high emissions taint the overall project. As a result, parties need to reflect on the allocation of emissions-related risks in their contracts and how monitoring, data-sharing and verification obligations will be managed.

Investigations and enforcement

Enforcement by government agencies is not limited to direct lawsuits; administrative penalties can be equally severe. Operators flagged for repeated methane leaks are at risk of significant fines or could face operational restrictions. In the EU, the planned global methane alert system is intended to strengthen cross-border collaboration. Although foreign operators remain outside direct EU jurisdiction, in practice the Regulation seeks to shift responsibility onto EU-based importers, who may reduce or discontinue purchases from suppliers with poor emissions track records in light of the potential fine implications. In the US, identification as a super emitter will result in additional regulatory attention.

Reputational pressures: increased public scrutiny

Public and media scrutiny has soared alongside regulatory oversight. Investigative journalists and NGOs routinely access satellite imagery, publicising such findings across social media. Once a perceived leak or persistent emission is widely broadcast, operators often face public criticism before regulators even begin inquiries. This real-time reputational risk is heightened by rising societal demands for clearer climate accountability, especially as more stakeholders integrate environmental metrics into investment and procurement decisions.

Firms that are slow to respond or do not have procedures and data in place to support their positions risk serious reputational impacts. Moreover, investor confidence can plummet if repeated leaks imply poor internal controls. As a result, reputational considerations often dovetail with legal liabilities, with effective responses and an ability to justify a company's reporting quickly and effectively playing a dual role in mitigating both.

Mitigating risk and driving positive change

Stronger emissions monitoring and reporting

Adopting robust technology to track methane leaks in near real time is increasingly seen as best practice. Some oil and gas companies partner with satellite providers to obtain direct alerts about changes in emissions. On-site infrared cameras, drone surveys, and regular LDAR protocols may assist with confirmation of (or evidence that enables a robust response to) satellite measurements. Reliable data also underpins well-supported disclosures, potentially providing a defence in potential litigation or regulatory challenges.

Given the growing prevalence of third-party satellite data, it is prudent to periodically review publicly available imagery of one's assets. Early detection of discrepancies allows for timely investigations and repair work, demonstrating a proactive stance if questioned by authorities or stakeholders.

To further provide confidence in climate disclosures, many firms also seek independent third-party assurance for their climate reports, particularly in relation to emissions data.

Embed climate governance at board level

This increased regulatory and reputational exposure underscores the need to treat climate risk as a governance priority. Many companies are forming specialist board committees or delegating clear climate responsibilities within existing structures. Proper oversight also involves scenario planning, assessing how stricter methane rules, carbon pricing or reputational setbacks would affect operations and finances. Documenting this process helps boards demonstrate that they have exercised due care in addressing climate challenges.

In addition, directors and officers should understand their potential liability for inaccurate statements on emissions or slow responses to identifiable leaks. Training sessions or climate-focused briefings can strengthen the board’s knowledge base, improving oversight quality and, in turn, lowering legal and reputational risks.

Update contracts throughout supply chains

Commercial contracts with suppliers and joint venture partners increasingly feature climate-related clauses.

For EU-facing operations, importers should also prepare to demonstrate the reasonable steps they are taking to ensure foreign suppliers meet the relevant methane standards. Early engagement and support helping suppliers upgrade equipment or providing guidance on best practices can mitigate supply disruptions and prevent legal conflicts later.

Prepare crisis management and communication plans

A single major leak uncovered by satellite imagery can quickly escalate into a reputational crisis. Well-rehearsed crisis management procedures help organisations contain the fallout:

• Rapid response: Identify who will investigate and address the leak, liaise with regulators and, if necessary, issue statements.
• Clear communication: Provide factual updates, have the ability to surface 'best available' information quickly and use it to outline corrective actions.
• Data transparency: If relevant, consider whether you can share your own emissions records, including steps taken to reduce methane or repair equipment.

By responding swiftly and transparently, companies can show they are serious about environmental stewardship, potentially mitigating both reputational harm and legal liability.

Closely monitor evolving regulatory requirements and engage with policymakers

Rather than resisting these developments world-wide, constructive engagement can yield more practical regulations. Policymakers often welcome technical input on what monitoring frequencies, equipment upgrades, or disclosure standards are feasible. Providing data on implementation costs or operational impacts helps shape balanced regulations that accommodate both climate goals and energy realities. Such engagement also positions companies as credible stakeholders, which can be advantageous if disputes arise.

Conclusion: Preparing for a more transparent future

In an era where satellite data can give near-instantaneous insights into operational emissions, oil and gas companies may be able to draw on better and more timely information to help them manage their operations and emissions. At the same time, companies must be prepared for heightened scrutiny from regulators, investors and the public. The EU Methane Regulation, EPA methane rules, California climate disclosure requirements and other evolving frameworks are driving a shift from self-assessment towards externally monitored and verified, data-driven oversight.

For industry leaders, the benefits of proactive compliance can be substantial. By integrating robust monitoring technologies, refining contractual arrangements and embedding climate governance at the highest levels, companies stand a better chance of improving operational practices, driving financial benefit, safeguarding value, avoiding lawsuits, preserving their reputations and maintaining stable access to key markets. The alternative risks fines, legal actions and loss of trust among stakeholders.

Ultimately, the quantity, quality and availability of satellite data will only increase. As climate-related standards develop globally, investors, regulators and the public will look for tangible proof that operators are taking emissions reduction seriously. Those in the oil and gas sector who act decisively, embrace accurate disclosures, innovate in emissions controls and engage constructively with regulators, will not only reduce legal risks but likely improve the profitability of their supply chains and the marketability of their cargoes/hydrocarbons.