On August 12, 2022, Congress passed the Inflation Reduction
Act, which includes $369 billion in spending on climate action. The Act
introduces a “waste emissions charge,” which makes companies who produce,
transport, or store oil and gas pay for methane that leaks from their
facilities into the atmosphere. The charge will start at $900.00 per metric ton
of methane and rise to $1,500.00 per metric ton by 2026. The Act is the first time
the federal government has directly imposed a charge, fee, or tax on greenhouse
gas emissions.
Methane is a greenhouse gas that frequently leaks from oil
and gas pipelines as a waste product and is the primary component of natural
gas. While methane dissipates more quickly than carbon dioxide, it is more than
72 times more potent than carbon dioxide as a greenhouse gas over a 20-year
period. The US oil and gas industry is the largest source of methane emissions
and emit 16 million metric tons annually. The Act aims to force oil and gas
companies to plug leaks and stop deliberate venting of methane, resulting in an
estimated reduction of methane leakage from 1.9% to somewhere between 0.4% and
1.1%.
The Act includes an exemption for companies that emit less
than 25,000 metric tons of carbon dioxide equivalent per year. This effectively
exempts around 60% of emissions. The Act also exempts distribution facilities
that bring natural gas to homes and businesses. Additionally, companies that
comply with the EPA’s forthcoming methane rules would be exempted from the fee.
The rules require companies to upgrade equipment, monitor leaks, and clean
them.
The Act provides supplemental appropriations of $850 million
to the EPA to provide grants to facilities subject to the methane charge for a
range of objectives, including improving and deploying industrial equipment and
processes that reduce methane emissions. Another $700 million of supplemental
appropriations is set aside for “marginal conventional wells” that serve the
same purpose. The oil and gas industry are expected to lobby for states not to
oppose implementation of the EPA’s regulations so that they can comply with the
regulations, receive equipment grants, and avoid paying a fine.
