EPA sets rules for proposed methane emissions fee for oil, gas industry

Jan. 16, 2024
US oil and gas companies would pay $900/tonne this year for methane emissions exceeding certain levels under a proposed rule released Friday by the US EPA.

US oil and gas companies would pay $900/tonne this year for methane emissions exceeding certain levels under a proposed rule released Friday by the US Environmental Protection Agency (EPA).

The Methane Emissions Reduction Program, included in the Inflation Reduction Act of 2022, includes the directive from Congress requiring EPA to impose and collect the emissions fees.

The new Waste Emissions Charge (WEC) for methane applies to oil and natural gas operations that emit more than 25,000 tonnes/year (tpy) of CO2 equivalent, that exceed statutorily specified waste emissions thresholds set by Congress, and that are not otherwise exempt from the charge, EPA said.

The WEC fee would jump to $1,200/tonne for 2025 emissions and $1,500/tonne for emissions in 2026 and later. EPA said the fee should encourage industry to adopt best practices that reduce emissions of the greenhouse gas to avoid paying.

EPA Administrator Michael Regan said the proposed fee will complement other actions mandated by Congress, including the agency’s final rule on methane emissions issued in December. That rule includes a 2-year phase-in period for companies to stop flaring natural gas at new oil wells.

As part of the broader methane-reduction programs outlined by Congress in 2022, EPA in partnership with the US Department of Energy (DOE) will provide $1 billion in financial and technical assistance to accelerate a transition to no- and low-emitting oil and gas technologies, including funds for activities associated with low-producing conventional wells, support for methane monitoring, and funding to help reduce methane emissions from oil and gas operations.

EPA is also working with industry and other stakeholders to improve the existing Greenhouse Gas Reporting Program and increase the accuracy of reported methane emissions.

“EPA is delivering on a comprehensive strategy to reduce wasteful methane emissions that endanger communities and fuel the climate crisis,” Regan said in a statement. When finalized later this year, the proposed methane fee will set technology standards that will “incentivize industry innovation”' and spur action to reduce pollution, he said.

Regan acknowledged that some oil and gas companies already meet or exceed performance levels set by Congress under the law and will not face the proposed fee. Over time, fewer oil and gas producers will face the fee as they reduce emissions in compliance with the rule, EPA said.

Dustin Meyers, American Petroleum Institute (API) senior vice-president of policy, economics, and regulatory affairs, urged Congress to repeal the methane fee. 

“As the world looks to US energy producers to provide stability in an increasingly unstable world, this punitive tax increase is a serious misstep that undermines America’s energy advantage,” Meyers said in a statement. “While we support smart federal methane regulation, this proposal creates an incoherent, confusing regulatory regime that will only stifle innovation and undermine our ability to meet rising energy demand. We look forward to working with Congress to repeal the [Inflation Reduction Act’s] misguided new tax on American energy.”

US Sen. Tom Carper (D-Del.), chairman of the Senate Environmental and Public Works Committee, applauded the move, saying this and other actions are critical to slowing climate change and protecting the planet. “We know methane is over 80 times more potent than carbon dioxide at trapping heat in our atmosphere in the short term.”

Rep. Frank Pallone (D-NJ), the top Democrat on the House Energy and Commerce Committee, said the new fee will make it uneconomic for oil and gas companies to “waste” methane. “For too long it has been cheaper for oil and gas operators to waste methane rather than make the necessary upgrades to prevent leaks and flaring,” he said.

Many Republicans say the fee, which they call a tax, would raise natural gas prices, harming American consumers.

Environmental Defense Fund president Fred Krupp said it was “common sense to hold oil and gas companies accountable for this pollution. Proven solutions to cut oil and gas methane and to avoid the fee are being used by leading companies in states across the country.”

EPA’s proposed rule details how the charge will be implemented, including its calculation and how exemptions will be applied.