On Jan. 12, 2024, the Environmental Protection Agency (EPA) announced a proposed rule requiring US oil and gas companies to pay a $900/tonne waste emissions charge for methane exceeding a certain level. The proposal was driven by Congress’ directive in the Inflation Reduction Act (IRA) of 2022 to incentivize industry adoption of best practices that reduce pollution.
The Biden administration described the proposed rule as encouraging “early deployment of available technologies and best practices to reduce methane emissions” before new standards take effect. EPA had issued a final rule last year placing stronger controls on methane emissions from oil and gas operations, with Congress authorizing grants in excess of $1 billion to improve leak detection and repair, methane monitoring, and data collection (OGJ Online, Dec. 4, 2023).
The IRA directive was included in its Methane Emissions Reduction Program, other aspects of which EPA is also working to implement. The charge the new rule proposes applies to oil and natural gas operations that emit more than 25,000 tonnes/year of CO2 equivalent, exceed waste emissions thresholds set by Congress, and are not otherwise exempt. It increases to $1,200/tonne in 2025 and $1,500/tonne in 2026 and later. Such fines would be the first federal fees imposed on the industry for its methane emissions, with the proposed regulation becoming final after a 45-day public comment period.
American Petroleum Institute (API) senior vice-president of policy, economics, and regulatory affairs, Dustin Meyer, said the organization looks forward “to working with Congress to repeal the IRA’s misguided new tax on American energy.” API also cited a lack of coordination between policy makers in shaping methane regulations, including those in the IRA, while calling for the need to work together “both within EPA and between federal regulators and the industry” in crafting cohesive rules.
Get it together
The best way to craft effective regulations is in consultation with the regulated industry, and to the degree industry was not consulted regarding the methane program it should have been. Any rules promulgated without industry involvement will be hobbled from the start. The industry knows better than anyone what it can do and at what cost. It can also offer insights into potential technological or administrative roadblocks.
Early involvement also enhances buy-in, which is essential to effective, efficient regulation. This is particularly the case when the regulations require industry self-reporting and lack mechanisms for government verification, as is the case in this instance.
But industry doesn’t have to have this rule repealed to get to work on a new one. Or to simply reduce emissions proactively, as many among its ranks already have.
Preconditions are anathema to dispute resolution. It’s no more helpful for industry to insist this rule get struck down as a requirement for moving forward than it is for climate activists to claim that the only way they’d come to the table is if oil and gas operations are halted.
EPA is already working with industry to improve the agency’s greenhouse gas reporting program and increase the accuracy of reported methane emissions, and this cooperation should be used as a foundation on which new and effective legislation can be built.
The surest way to avoid prescriptive regulation is to comply proactively with existing guidance. The US industry is among the world’s leaders in greenhouse gas abatement thus far. This fact does not remove the need for outliers to address their emissions-related issues, but it does give them a good starting point.
Quid pro quo can’t be how business gets done. When everything is treated as a political tool, all you end up conducting is politics, not policy.
