US Nears Giant Leap on Methane Action

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Lawmakers this week look set to finalize legislation that could help deliver on the US pledge to reduce methane emissions through a fee on the potent greenhouse gas. The US and EU last year sponsored a global effort to get countries to focus on limiting releases of methane by 30% collectively by 2030. More than 100 countries signed on throughout the last year. But getting substantial reductions will rely on countries implementing national-level policies — something the Inflation Reduction Act currently set for a vote in the US House of Representatives seeks to do.

The Basics

The proposed law ties a methane fee to compliance with the US Environmental Protection Agency’s (EPA) forthcoming methane standards for the sector. The fee starts at $900 per metric ton of methane over a 25,000 metric ton threshold in 2024 before topping out at $1,500 per metric ton in 2026. The EPA’s pending methane regulations, as proposed, would be fully in effect in 2026. The threshold is in line with the EPA’s current reporting requirements for methane releases. The Congressional Budget Office estimates the fee will raise $850 million in 2026, peaking at $1.4 billion in 2028 before declining.

The methane fee also doesn’t kick in until companies’ releases exceed 0.2 percent of gas sales, or 10 metric tons of methane per million barrels of oil sales. “I would think some of this is giving companies a little wiggle room so that they’re not totally buried under a tax,” says Mark Agerton of the University of California at Davis, noting this is helpful if a drive to completely zero out methane emissions would be too costly or impractical. At the same time, the bill appears aimed at reducing incentives for venting and flaring at fields on federal onshore and offshore lands. Companies will have to pay royalties on all methane produced regardless of whether they sell it. That even includes gas lost by venting, flaring and “negligent releases” — a shift from the status quo.

Safeguard Against Rollbacks

The bill also structures the methane fee — controversial with industry — as a safeguard against a future administration rolling back methane emissions requirements, notes Brian Prest at Resources for the Future. “If the regulations, for whatever reason, are not in effect in 2024, then you have the methane fee,” Prest said. The bill also notes that the rules must be “at least as stringent” as the EPA’s rule as it was proposed in 2021. If rules are eased, the methane fee applies. That marks an effort to ensure methane is subject to rules — even if a new administration were to repeal the EPA’s proposal, or a court overturn it. Those are possibilities that climate action advocates are keenly aware of following the Trump administration’s regulatory rollbacks and the Supreme Court’s recent power-sector decision.

Better Measurement

The bill also requires the EPA to improve how it accounts for methane emissions to “accurately reflect total methane emissions and waste emissions.” Owners and operators can also “submit empirical emissions data,” presumably if they want to prove they are releasing less than the agency might estimate.

Industry will also receive government help for better measurements, with $1.55 billion, and the EPA meanwhile gets $20 million specifically for monitoring methane. As the agency works to finalize its rules, it's been a challenge determining how to report methane emissions when observed releases often exceed estimated volumes. “Right now the federal government has data sets, but the data sets are not seen to be a full accounting,” Prest says. That also reduces incentives for companies to tamp down on methane releases if the EPA’s current estimation methods downplay the quantities. “If they do a good job of improving those estimates, I think that could go a long way.”

Methane Emissions, Low-Carbon Policy, Policy and Regulation
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