Methane Fee Introduced by EPA

Will It Reduce Greenhouse Gas Emissions or be Overturned in January?

The Environmental Protection Agency (EPA) has introduced a new fee for oil and gas companies that produce excess methane emissions. This rule comes from the Inflation Reduction Act of 2022 and aims to reduce harmful greenhouse gases[1][6].

Methane is a Super-Pollutant

Methane is a super-pollutant that is extremely harmful to the environment. Here are key facts about methane:

It is 28 times more potent than carbon dioxide over 100 years[2]
Responsible for about one-third of current global temperature rise[7]
The oil and gas sector is the largest industrial source of methane emissions in the United States[5]

How the Methane Fee Works

Who Pays the Methane Fee?

Targets companies with methane emissions above specific thresholds[4]
Applies to oil and gas facilities reporting over 25,000 metric tons of carbon dioxide equivalent emissions

The new methane emissions fee structure targets various categories of petroleum and natural gas facilities, each with specific emission thresholds:

Petroleum and Natural Gas Production (Onshore/Offshore): Facilities that emit more than 0.20% of natural gas sent to sale, or 10 metric tons of methane per million barrels of oil, are subject to fees.
Natural Gas Processing and LNG Facilities: Emissions from natural gas processing plants, LNG storage, and import/export equipment are fined if they exceed 0.05% of the natural gas sent to sale from or through the facility.
Natural Gas Transmission and Storage: For transmission compression stations, underground storage, and pipelines, emissions must stay below 0.11% of the natural gas processed through the facility to avoid fees.

This structure incentivizes facilities to reduce methane emissions to avoid additional costs.

Fee Structure

First year (2024): $900 per metric ton of excess methane
2025: Fee increases to $1,200 per metric ton
2026 and beyond: $1,500 per metric ton[4][6]

Expected Impact

The EPA estimates the methane fee will:

Reduce methane emissions by 1.2 million metric tons through 2035
Equivalent to removing 8 million gas-powered cars from the road
Potentially create up to $2 billion in climate benefits[6]
Reduce inflation

Industry Response

Supporters

Environmental groups praise the fee as holding companies accountable
Many large oil and gas companies already meet emission standards[6]

Opponents

The American Petroleum Institute calls it a “punitive tax increase”
Industry groups are likely to challenge the rule in court[6]
Trump previously reversed similar fees during his first term

Inflation Reduction Act

The methane fee is part of the Biden administration’s larger climate strategy. It works alongside other initiatives in the Inflation Reduction Act to:

Encourage clean energy adoption
Improve energy efficiency[3][8]

The EPA’s methane fee represents a significant step in addressing climate change by targeting one of the most potent greenhouse gases. While controversial, the program aims to incentivize oil and gas companies to reduce their environmental impact.

Further Reading:
[1] https://www.epa.gov/inflation-reduction-act/methane-emissions-reduction-program
[2] https://www.epa.gov/ghgemissions/overview-greenhouse-gases
[3] https://home.treasury.gov/policy-issues/inflation-reduction-act
[4] https://www.sidley.com/en/insights/newsupdates/2024/02/us-epa-proposes-rules-to-implement-methane-emissions-fee-for-oil-and-natural-gas-sources
[5] https://www.epa.gov/newsreleases/biden-harris-administration-announces-proposed-rule-reduce-wasteful-methane-emissions
[6] https://www.cbsnews.com/news/epa-methane-fee-oil-gas-companies-drilling-waste/
[7] https://www.iea.org/reports/global-methane-tracker-2022/methane-and-climate-change
[8] https://www.whitehouse.gov/cleanenergy/inflation-reduction-act-guidebook/
[9] https://www.epa.gov/inflation-reduction-act/inflation-reduction-act-programs-fight-climate-change-reducing-embodied
[10] https://www.iea.org/policies/16156-inflation-reduction-act-of-2022

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